Brief Contents Chapter 1 The world of International Economics PART 1 THE CLASSICAL THEORY OF TRADE Chapter 2 Early Trade Theories: Mercantilism . Appleyard, Field, and Cobb cover the emerging issues in the global economy, which enables students to recognize how strongly globalization links countries. IE-Appleyard, Field and Cobb – Download as PDF File .pdf), Text File .txt) or read online.
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We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Published by Cbob Newton Modified over 3 years ago. Introduction Welcome to the study of international trade! You will be studying one of the oldest branches of economics.
Appleyard / Field / Cobb Sixth Edition – ppt download
The study of international economics concerns decision making with respect to the use of scarce resources to meet desired economics objectives. The Geographical composition of Trade; The industrialized countries dominate world trade.
The Commodity Composition of Trade. Fieldd Trade Canada is the most important trading partner, both in exports and imports; Agricultural products are an important source of exports. International trade in services broadly consists of commercial services, investment income, and government services.
International services trade is also concentrated among the industrial countries. Do what you do best. Trade for the rest. It has long been perceived that nations benefit in some way by trading with other nations. Mercantilism is often referred to conb the political economy of state building.
The Role of Government Controlling the use and exchange of precious metals. Maximizing the likelihood of a positive trade balance and the inflow of specie. Mercantilism and Domestic Economic Policy. Controlling of industry and labor.
Pursuing the policies that kept wages low. David Hume-The Price-Specie-Flow Fieldd A nation could continue to accumulate specie without any repercussions to its international competitive position.
The accumulation of gold by means f a trade surplus would lead to an increase in the money supply and therefore to an increase in prices and wages. Adam Smith and the Invisible Hand Laissez faire: Allowing individuals to pursue their own activities within the bounds of law and order and respect for property rights.
Countries should specialize in and export those commodities in which they. The underlying basis for these words is comparative advantage. Ricardian Comparative Advantage Ricardo presented a case describing the production of two commodities, wine and cloth, in England and Purtugal.
Resource Constraints To demonstrate the total gains from trade between these two countries, it is necessary to first establish the amount. Suppose that country A has 9, labor hours available and country B has 16, labor hours available. Examining the equivalent quantity of domestic filed services consumed before and after trade for each country.
Country A has gained the equivalent of labor hours. After trade, country B consumes 5,C and 1,W. Country B has gained the equivalent of 1, appleyarv hours. Complete Specialization Complete Specialization: Country A producing only cloth and country B producing only wine, they exchange 2, barrels fieldd wine for 5, yards of cloth.
A would gain 10, hours, which is greater than the annd value of consumption in either autarky or in the. Country B is also better off because it now consumes 5, yards of cloth and 2, barrels of wine with a labor value of 18, hours. Production Possibilities-An Example Representing the Ricardian Model with Production-Possibilities Frontiers The PPF reflects all combinations of two products that a country can produce at a given point in time given its resource base, level of technology, full utilization of resources, and economically efficient production.
Maximum Gains from Trade.
Comparative Advantage-Some Concluding Observations. With the initiation of trade, country A was able to produce appleyard new, flatter consumption-possibilities frontier with trade. Country A can now choose to consume a combination of goods that clearly lies outside its own PPF in autarky, thus demonstrating the potential gains from trade.
Comparative advantage-some concluding observations Up to this point, nothing has been said about the basis for the comparative advantages tat a country might have in trade. Specialization in the production of goods that have few links to the rest of the economy can lead to a lopsided pattern of growth.
The Classical writers have made us aware that trade not only produces static gains but also can be a positive. One the exchange rate is established, the value of all goods an be stated in term of one currency.
The result of trade is the same as that reached in the examination of relative labor efficiency between the two countries. The endpoints of the range within which the wage can vary. Similarly, there are exchange rate limits. The export condition indicates when a country has a cost advantage in a particular product, that condition can be used to determine the wage that will applleyard prices to be the same in the two countries.
The Effect of Wage Rate Changes Expanding the number of commodities is a useful extension of the basic Classical model because it permits an analysis of the effects of exogenous changes in relative wages or the exchange rate on the pattern of trade.
Tools to Be Employed Chapter 5. Consumer Indifference Curves Traditional microeconomic theory begins the analysis of individual consumer decisions through the use of the consumer indifference curve. Cardinal utility and ordinal utility.
Transitivity means that if a bundle of goods B is preferred or equal to a bundle of goods A and if a bundle of goods C is preferred or equal to a bundle of goods B, then bundle C must.
An indifference curve must be downward sloping because less of one good must be compensated with more of the other good to maintain the same satisfaction level.
Diminishing marginal rate of substitution. An indifference curve can not intersect for the individual consumer. The income level is represented by the budget constraint or budget line. Consumer Equilibrium The objective of the consumer is to maximize satisfaction, subject to the.
The individual indifference curves show levels of satisfaction, and the budget line indicates the income constraint, the consumer maximizes satisfaction when the budget line just touches the highest indifference curve attainable.
Isoquants An isoquant is the concept that relates output to the factor inputs. An isoquant shows the various combinations of the two inputs that produces the same level of output.
The exact shape of an isoquant reflects the subsitution possibilities between capital and labor in the production process. The negative of the slope of the isoquant at any point is equal to the ratio of the marginal productivities of the factors of production. The ratio of marginal productivities is often referred to as the marginal rate of technical substitution. Isocost Lines An isocost line shows the various combinations of the factors of production that can be purchased by the firm for a given total cost at given input prices.
The negative of the slope of a isocost is equal to the ratio of the wage rate to the rental rate on capital. The choice of the combination of factors of production to employ involves consideration of factor prices and technical factor requirement. At the equilibrium point the isoquant is tangent to the isocost, and the firm is obtaining the maximum output for the given cost.
Draw the isoquants for firms in industry X, and draw the isoquants for firms in industry Y. This case includes increasing opportunity costs, factors of production besides labor, and explicit demand considerations. The economy is assumed to be seeking to maximize its well-being through the behavior of its economic agents. In autarky, as in trade, production takes place on the PPF.
The equilibrium is at the point where the PPF is tangent to the price line for the two goods. The Consumption and Production Gains from Trade Economists sometimes divide the total gains from trade into two conceptually distinct parts: Moving production toward the comparative-advantage good thus increases welfare. Trade in the Partner Country. Because of the relative prices available through international trade, producers in the partner country have an incentive to produce more of good Y and less of the X good since partner country has a comparative advantage in good Y.
Trade Between Countries with Identical PPFs According to the neoclassical theory, two countries with identical production conditions can benefit from trade. Different demand conditions in the two countries and the presence of increasing opportunity costs are the two principal conditions.
Appleyard / Field / Cobb Sixth Edition
Trade Between Countries with Identical Cbb Condition Production conditions may differ because different technologies are employed in two countries with the same relative amounts of the two factors, capital and labor. Country I, which is more efficient in producing good X, will find itself producing and consuming more of this product in autarky.
Similarly, country II produces more good Y. Each country can then attain a higher indifference curve. Costless Factor Mobility One important assumption is that factors of production can shift readily and without cost along the PPF as relative prices change and trade opportunities present themselves.
Full Employment of Factors of Production This assumption is related to the problem of adjustment. The country is operating on the PPF.
The Indifference Curve Map Can Show Welfare Changes If intersections of community indifference curves occur, there might be a problem in interpreting welfare changes when a country moves from autarky to trade.
We cannot be sure that the direction of ccobb actual welfare can be meaningfully ascertained. An important simplification was made: World prices with trade were assumed to vield at a certain level. An important analytical concept employed to explain the determination of the terms of trade is known as the offer curve.
The offer curve is a combination of a demand curve and a supply curve. The most useful feature of the offer curve diagram is that it can cobb two trading countries together in one diagram.
The equilibrium point E occurs applleyard the intersection of the two offer curves. At point E, the quantity of exports that country I wishes to sell exactly equals the quantity of imports that country II wishes to buy. Similar to country I.