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Strategies for Global Value Added: Gains Comparative advantage - page 18 / 30

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18

Trade and the product mix

General rule: The low-price country exports and the high-price country imports.  

Country A supplies the good if   PA1 < PB1.

Recall that prices equal unit labor costs:

PA1 = WA /gA1                     PB1 = WB/gB1

So, Country A supplies the good if lower unit costs:

WA /gA1   <   WB/gB1      

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