Question

“Greater the price elasticity of demand, greater is the gains from trade”. Is

this statement True or False for a country that imports the commodity from

abroad? Justify and logically analyze your argument. Draw graphs if

necessary.​

Answer 1

“Greater the price elasticity of demand, greater is the gains from trade”

Explanation :

The above said statement is true  because :

1. The more  increase in surplus  when  a greater increase in elasticity occurred.
2. Totally surplus will be increased when  it is a perfectly inelastic demand curve.
3. Consumers gets benefit from these trade when the demand curve is inelastic .
4. Elasticity is more than one.