Wealthy country A enters into a free trade agreement with poor country B. Country B improves its productivity. Country A pays lo
wer prices for goods imported from poor country B. However, Samuelson expresses concern that these lower prices may not offset possible ______ in wealthy country A.
At least two or more countries involved in free trade agreement where the quality of the trade relation between the countries are improved. There is mutual cooperation between the two countries to lower the trade barriers reduce the tariffs and trade quotas, etc.
Free trade means more growth and rise in economy but it affects the wage rates. There are more skilled labors in the rich country compared to a poor country. Therefore the free trade will increase the wages of the skilled labor whereas it will decrease the wages of the unskilled labor. This theory is given by Stolper-Samuelson.
Therefore in the context, the rich country A importing goods at lower price will not offset the claim of lower the wages rates in the country.
It did because they made the producers produce more and more goods, and the more they produced the more they would earn. Production speed was also an important factor as everything had to be made quickly and in large numbers.
You tend to perceive the elements in the first example as two units because of the law of similarity, which states that elements that are similar to each other tend to be seen as one group. You tend to perceive the elements in the second example as five units because of the law of proximity, which states that elements that are closely placed together are usually seen as one group even when they are within a larger group.
