Question

When a domestic country is small relative to world markets, is a price taker, and its consumption and production do not affect the world price, it can be studied using:________.

Answer 1

When a domestic country is small relative to world markets,is a price taker and its consumption and production do not affect the world price,it can be studied using macroeconomic variables.

Given that a domestic country is small relative to world markets, is a price taker, and its consumption and production do not affect the world price.

We are required to give a way to study the effect of size of country on the world prices.

The prices depend on the size of the country. The country which is big in size can manipulate the prices by changing the supply of the goods whereas the country which is not much big cannot change the prices. The demand and supply of international prices are the macroeconomic variables.So to study the effect of size of country on the prices,we need to study these variables.

Hence when a domestic country is small relative to world markets,is a price taker and its consumption and production do not affect the world price,it can be studied using macroeconomic variables.

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