When Geometry Emerged: Some Neglected Early Contributions to Offer-Curve Analysis

I n his 1952 A Geometry of International Trade, Nobel Laureate James Meade presented the definitive modern version of the celebrated reciprocaldemand, or offer-curve, diagram of the trade theorist. The diagram features curves depicting alternative quantities of exports and imports countries are willing to trade at all possible prices (see Figure 1). Let two countries, home and foreign, trade two goods, x and y. Measure quantities of these goods along the horizontal and vertical axes, respectively. Suppose the home country exports good x and imports good y while the foreign country does the converse. The slope of any ray from the origin expresses the relative price of x in terms of y. That is, it expresses the quantity of y exchanged per unit of x, or y price of x. Curve H is the home country’s offer curve. Curve F is the foreigner’s. Each curve shows alternative quantities of imports demanded and exports supplied at all price ratios or terms of trade. As drawn, the curves display declining elasticity, or price responsiveness, throughout their length. They slope upward from left to right when the demand for imports in terms of exports is elastic—that is, when more exports are offered for imports at successively lower import prices. They cease to slope upward when import demand becomes unit-elastic. At such points, the quantity of exports offered for total imports remains unchanged as import prices fall. They bend backward (or downward) when import demand is inelastic. Along such segments, fewer exports are offered for total imports when import prices fall.