Final answer:
A country's purchasing power is affected by trade through changes in equilibrium price and quantity determined by supply and demand. Trade allows countries to export goods where they have a comparative advantage and import goods they lack efficiently. Diagrams of supply and demand before and after trade visualize the shifts in equilibrium price and quantity.
Step-by-step explanation:
A country's purchasing power is influenced by trade through changes in the equilibrium price and quantity of goods and services. In a world without trade, the equilibrium price and quantity for each country are determined where the domestic supply equals the domestic demand. You can tell by analyzing the intersection point on a supply and demand diagram for that country's market.
When trade is allowed, the equilibrium price and quantity in each country may shift, as countries will export goods in which they have a comparative advantage and import those in which they don't. The new equilibrium price can be seen where the country's supply and demand curves intersect the world supply and demand curves. This results in an optimization of resources and an increase in a country's purchasing power when the products it buys from abroad are cheaper or of better quality than those produced domestically.
To illustrate this, you can sketch two supply and demand diagrams, one for each country, before trade. Subsequently, you would adjust the diagrams to show new levels of exports and imports, which reveal the equilibrium price and quantity after trade starts. These levels result from the balance between what a country can sell to others and what it needs to buy from them.