Application International trade Chapter 9 Copyright C 2001 by Harcourt, Inc All rights reserved. Requests for permission to make copies of any part of t work should be mailed to Permissions Department, Harcourt College Publishers 277. Sea Harbor Drive. Orlando Florida 32887-6777 ◎2001 by Harco
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Application: International Trade Chapter 9 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777
International Trade What determines whether a country imports or exports a good? Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. International Trade What determines whether a country imports or exports a good?
International Trade Who gains and who loses from free trade among countries? H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. International Trade Who gains and who loses from free trade among countries?
International Trade What are the arguments that people use to advocate trade restrictions? H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. International Trade What are the arguments that people use to advocate trade restrictions?
Equilibrium Without Trade Assume A country is isolated from rest of the world and produces steel o The market for steel consists of the buyers and sellers in the country No one in the country is allowed to import or export steel. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Equilibrium Without Trade Assume: uA country is isolated from rest of the world and produces steel. uThe market for steel consists of the buyers and sellers in the country. uNo one in the country is allowed to import or export steel
Equilibrium Without Trade f steel Domestic supply Consumer surplus Equilibrium 日面园日面里日面题 Price Producer surplus Domestic demand Equilibrium ntit quantity steel H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Equilibrium Without Trade... Price of Steel Equilibrium Price 0 Quantity of Steel Equilibrium quantity Domestic supply Domestic demand Producer surplus Consumer surplus
Equilibrium Without Trade Results o Domestic price adjusts to balance demand and supply o The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Equilibrium Without Trade Results: u Domestic price adjusts to balance demand and supply. u The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive
World Price and comparative Advantage If the country decides to engage in international trade. willl it be an importer or exporter of steel Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. World Price and Comparative Advantage If the country decides to engage in international trade, will it be an importer or exporter of steel?
World Price and Comparative Advantage The effects of free trade can be shown b comparing the domestic price of a good without trade and the world price of the good. The world price refers to the prevailing price in the world markets. A country will either be an exporter or an importer of the good H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. World Price and Comparative Advantage The effects of free trade can be shown by comparing the domestic price of a good without trade and the world price of the good. The world price refers to the prevailing price in the world markets. uA country will either be an exporter or an importer of the good
World Price and comparative Advantage If a country has a comparative advantage, then the domestic price will be below the world price, and the country will be an exporter of the good Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. World Price and Comparative Advantage If a country has a comparative advantage, then the domestic price will be below the world price, and the country will be an exporter of the good