TWO COUNTRIES COMPETING IN A THIRD 105 
The barter terms of trade would obviously be 10 wheat = 10.7+ 
of cloth; this being the ratio in terms of physical units of the price 
relations — $0.93 for cloth and $1.00 for wheat. That 1s, 10 wheat 
exchange for less than 13 cloth. Trade on this basis, as we have 
seen, gives a large share of the possible gain to England and Ger- 
many ; a comparatively small one to the United States, even tho 
one sufficient to make the exchange of some advantage to her. 
(2) Let the figures now be shifted in such manner as to conform 
to terms of trade under which 10 wheat exchange for more than 
13 of cloth. For simplicity, we keep the United States figures as 
they were before, as regards money wages and the domestic supply 
prices of goods, confining the readjustments to the other countries. 
In the U. S. 
» » U. S. 
"England 
” England 
Germany 
Germany 
27 
eg 
Wages 
-or TY 
Torar 
Probuce 
") wheat 
cloth 
wheat 
cloth 
1) wheat 
13 cloth 
Domesric 
SurprLy PRICE 
®1.00 
00 
10 
73 
& .00 
0.77 
Wages have now fallen in England from $1.40 to $1.10, and in 
Germany from $1.21 to $1.00. The supply prices of English and 
German goods have fallen correspondingly. Such is the nature of 
the results to be expected if a change in demand sets in which 
causes the barter terms of trade to be more favorable to the United 
States — if more wheat were demanded by England and Germany 
under the price conditions of Case 1 than was equal in money value 
to the cloth demanded under those conditions by the United States. 
Wages and the supply prices of goods are lower in England and 
Germany than they were before. The domestic supply price of 
wheat is now the same ($1.00) in Germany as it is in the United 
States, and wheat would not move between the two. But the 
price of wheat is lower than its domestic supply price in England 
($1.10) and England would import wheat from both Germany and 
the United States. The domestic supply price of cloth, on the 
other hand, is lower in England ($0.73) than it is in either Germany 
(80.77) or the United States ($1.00), and cloth would move from