demand for dollars? Arcangel,Alecxiemar (Theory, Part II), Gains From Trade and the Law of Comparative Advantage (Empirics), The Heckscher-Ohlin Model (Theory, Part I), The Heckscher-Ohlin Model, (cont.) Since PAPA, Nation 1 has a comparative advantage in commodity X and Nation 2 in commodity Y. Equilibrium-Relative Commodity Prices and Comparative Advantage Why the relative prices are different in different countries? US relative tariffs demand for US Ohlin's name lives on in one of the standard mathematical model of international free trade, the Heckscher-Ohlin model, which he developed together with Eli Heckscher. Governments may impose tariffs to raise revenue or to protect domestic exchange rates with other currencies. 4.The exchange rate affects the cost of servicing (Less) - `3DX.vU'zM\@DHR&|n!W"`Z |MGUr.cjZ" 8_H-j&TL?i+|.kkWn'F9gWEaCvU[& (change in reserve assets and change in reserve Topics in International Economics - PowerPoint PPT Presentation - PowerShow 1)When we export products or services, we create a demand for 7,731 It is this difference in absolute commodity prices in the two nations that is the immediate cause of trade. PowerPoint slides for each chapter are now available from Cambridge University Press. People will supply dollars now to avoid supply curve for dollars? become independent. PPT - International Economics PowerPoint Presentation, free download Due to their different production possibility frontiers (or supply conditions) and community indifference curves (demand conditions). This gives the country a propensity for producing the good which uses relatively more capital in the production process . Community indifference curves are negatively sloped and convex from the origin. Compared to the U.S., other countries are even more tied to international trade. Erratum: In Figure 3.5 on p. 53, both the EJM and the EVR distances are in the wrong place! Current Account 8,465 9,358 -9.5 Relative and Absolute Factor-Price Equalization To explain Figure 5-5 1. Capital and Financial Acc. Factor Change in US $ and quotas The Ricardian Model, (cont.) Get powerful tools for managing your contents. Community indifference curves refer to a particular income distribution within the nation. (according to physical units of factor abundance). <> This occurs at the point where a community indifference curve is tangent to the nations production frontier. Higher indifference curves higher satisfaction Points N and A give equal satisfaction to Nation 1, since they are both on indifference curve . li yumei economics & management school of southwest university. dollars because our customers need to pay for our goods and Growth Rate (%) (Less) - See page 67 table 3.1. International Economics - . week 1 12 th february 2013 introduction. new trade: key elements, irs & ic. They should be between points B and C and not the origin and point C. My apologies! The Marginal Rate of Substitution Marginal Rate of Substitution (MRS) 3. (Empirics, Part II), Trade Theory with Firm-Level Heterogeneity (Empirics, Part I), Trade Theory with Firm-Level Heterogeneity, (cont.) 2.Capital and Financial account- endobj Chapter 1: Introduction Chapter 1: Introduction updated figures and table Part I: International Trade Chapter 2: Absolute Advantage Chapter 3: Ricardian Model of Comparative Advantage So do people. The overall BOP position is a summary measure of the performance Due to the increasing costs, no nation specializes completely in the production of only one product in the real world. Foreign exchange arbitrage is the buying contents that tariff creates employment opportunities for 2. PPTX PowerPoint Presentation Power Point Slides - An Introduction to International Economics 2023 George Mason University, may not fall too much. Nation 2 is K-abundant nation and commodity Y is the K- intensive commodity, Nation 2 can produce relatively more of commodity Y than Nation 1.This gives a production frontier for Nation 2 that is relatively flatter and wider than the production frontier of Nation 1 (if measures Y along the vertical axis). PPT - International Economics PowerPoint Presentation, free download It means that with the more and more output of one commodity the resources or factors are used less efficiently. 2. Account In Nation 1 the relative price of commodity X is lower than in Nation 2, it means that the relative price of labor or wage rate is lower in Nation1 in the absence of trade; 2. rate The terms of physical units It means the overall amount of capital and labor available to each nation. ------------------------ 9g%>};;h)y \Ye;'''zAain)U E4F9@h]IV*s'Z``&CJQq]A??cL,|,Z8~z\nn?>=hn8.WV$/'J6"}(>fC}j1.bK\}Az`^{kPhz*GZMd Meaning of the Assumptions Assumption 3 of the labor intensive commodity X and the capital intensive commodity Y: It means that commodity X requires relatively more of labor to produce than commodity Y in both nations. 5.5 Factor-Price Equalization and Income Distribution The Factor-Price Equalization Theorem Relative and Absolute Factor-Price Equalization Effect of Trade on the Distribution of Income The Specific-Factors Model Empirical Relevance, The Factor-Price Equalization Theorem The Content of Factor-Price Equalization Theorem The factor-price equalization theorem says that when the prices of the output goods are equalized between countries, as when countries move to free trade, then the prices of the factors (capital and labor) will also be equalized between countries. a) Change in Reserve Assets (Gross International Income) cases the value, of goods and services that can be imported or exported foreign currency in terms of domestic currency . PowerPoint Slides for International Economics (Theory, Part II), Political Economy of Trade Policy and the WTO (Empirics, Part I), Political Economy of Trade Policy and the WTO, (cont.) CURENCYS VALUE IS ALLOWED TO FLUCTUATE Trade effects the income distribution within a nation and can result in intersecting indifference curves. declines/increases due to legislation. [ 13 0 R] because of the scarcity, thus, the spending on imports endobj xZ_S8LE&s!z\CHLI8pGoy2*$[vWU|y5`0:dsm0yMr=2epA1pAI3&L10Q(+C"EouDn>g84!Q_y[1DOL5>#%W} PPTX An Introduction to International Economics: New Perspectives on the ------------------------- canada with its. With trade in Nation 1 , the increase production of commodity X, the increase demand of labor leads to the relative higher price of labor compared with the capital, w/r will rise in the end; 6. foreign exchange markets. money is flowing out of the country than coming in, and vice 3.6 Trade Basis on Differences in Tastes Illustration of Trade Based on Differences in Tastes Conclusion, Illustration of Trade Based on Differences in Tastes With increasing costs, even if two nations have identical production possibility frontier (which is unlikely), there will still be a basis for mutually beneficial trade if tastes, or demand preferences, in the two nations differ.