ABSTRACT
The import equation (21.6) assumed above implies that there is no competition between imported and home-produced commodities. To make the equation more realistic allowance has to be made for a certain influence of relative prices. The equation then becomes: https://www.w3.org/1998/Math/MathML"> m = μ y + ε m ¯ P + m o https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781315016733/638486d9-2649-4b3d-946a-6258388baa5d/content/math_41_B.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/> where P is the ratio of domestic over foreign prices https://www.w3.org/1998/Math/MathML"> ( p d p m ) https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781315016733/638486d9-2649-4b3d-946a-6258388baa5d/content/inline-math_16_B.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/> , ε is the mean elasticity of substitution between domestic and foreign products, and https://www.w3.org/1998/Math/MathML"> m ¯ https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781315016733/638486d9-2649-4b3d-946a-6258388baa5d/content/inline-math_17_B.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/> stands for the average value of m. 1 It will readily be seen that the term https://www.w3.org/1998/Math/MathML"> ε m ¯ P https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781315016733/638486d9-2649-4b3d-946a-6258388baa5d/content/inline-math_19_B.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/> will have to be entered into the multiplicand if (31.1) is substituted for (21.6): https://www.w3.org/1998/Math/MathML"> y = f − ε m ¯ P δ + μ + y o https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781315016733/638486d9-2649-4b3d-946a-6258388baa5d/content/math_42_B.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/>
