The correct answer is: B. Price elasticity of demand
Price elasticity of demand is a measure of how much the quantity demanded of a good or service changes in response to a change in its price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
A high price elasticity of demand means that consumers are very sensitive to changes in price, and a low price elasticity of demand means that consumers are not very sensitive to changes in price.
Price elasticity of demand plays a crucial role in determining international trade because it affects the amount of goods and services that countries import and export. If the price elasticity of demand for a good is high, then a small change in the price of that good will lead to a large change in the quantity demanded. This means that countries will be more likely to import or export that good, depending on whether the price of the good is higher or lower in the other country.
For example, if the price of oil is high in the United States, then U.S. consumers will be less likely to buy oil, and U.S. oil companies will be less likely to produce oil. This will lead to an increase in the demand for oil from other countries, and an increase in the supply of oil from other countries. As a result, the United States will import more oil and export less oil.
On the other hand, if the price of oil is low in the United States, then U.S. consumers will be more likely to buy oil, and U.S. oil companies will be more likely to produce oil. This will lead to a decrease in the demand for oil from other countries, and a decrease in the supply of oil from other countries. As a result, the United States will export more oil and import less oil.
In conclusion, price elasticity of demand plays a crucial role in determining international trade because it affects the amount of goods and services that countries import and export.