The theory of overlapping demand predicts that trade in manufactured goods is unimportant for countries with very different ?
Correct answer: C. Per-capita income levels
- A. Tastes and preferences
- B. Expectations of future interest rate levels
- C. Per-capita income levels
- D. Labor productivities
Explanation
The overlapping-demand theory predicts more manufactured-goods trade when consumers in trading countries have similar purchasing power and product preferences. Very different per-capita incomes imply less overlap in demand.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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