Brian Butler: TBird int'l economics class 05

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Session #5

Why study trade? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Perspectives: ,[object Object],[object Object],[object Object],[object Object]

For initial discussion… ,[object Object],[object Object],[object Object],[object Object],[object Object]

benefits? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

why controversial? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

why controversial? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],Trade: Absolute Advantage:

[object Object],[object Object],[object Object],[object Object],Trade: Comparative Advantage:

[object Object],[object Object],[object Object],[object Object],Comparative Advantage cont’d:

Gains from Trade ,[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],Trade: Comparative Advantage:

example: ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],Airplanes apples France* price € 100m €7.47 USA* price $90 m $5.4 Note: if you are given Airplane prices, you should be able to derive apple prices!

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Comp. Adv. Assumptions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Barriers to gains? ,[object Object],[object Object],[object Object],[object Object]

Comparative Advantage Example: ,[object Object],[object Object],[object Object],[object Object],[object Object]

Comparative Advantage Example: ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Question: ,[object Object],[object Object]

Production if both countries specialize + trade ,[object Object],[object Object],[object Object],[object Object],Production / consumption with NO trade A B USA 120 40 Honduras 40 30 total = 160 + 70 = 230

How much SHOULD they trade? ,[object Object],[object Object],[object Object],[object Object]

What exchange rates make trade possible ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What FX rates give trade? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Comparative vs. Absolute? ,[object Object],[object Object],[object Object],[object Object]

Trade: definitions ,[object Object],[object Object],[object Object]

Trade: Comparative Advantage: ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Brian Butler: TBird int'l economics class 05

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Brian Butler: TBird int'l economics class 05