SY:2012-2013
International Trade
made by mathelrain
International Trade
the branch of economics concerned with the
exchange of goods and services with foreign
countries
International Trade
Almost every kind of product can be found
on the international market such as:
Food
Clothes
Spare Parts
Oil Jewelry
Wine
Stock
Currencies
Reference: http://www.wto.org/english/res_e/statis_e/its2012_e/its12_trade_category_e.htm
Reference: http://www.wto.org/english/res_e/statis_e/its2012_e/its12_trade_category_e.htm
Main Goal:
to help producers of
goods and services,
exporters, and importers
conduct their business.
Reference: http://wto.org/english/thewto_e/whatis_e/what_we_do_e.htm
Reference: http://wto.org/english/thewto_e/whatis_e/what_we_do_e.htm
Reference: http://http://docsonline.wto.org
Absolute
Advantage
and
Comparative
Advantage
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Opportunity Cost
Absolute Advantage
occurs when one producer can do a
task using fewer inputs than the
other producer
Comparative Advantage
occurs when a person or country can
produce a good or service at a lower
opportunity cost than others.
Why Specialize?
Because of specialization, both
nations can be better off, even if
one nation has an absolute
advantage in both goods over the
other.
Why Trade?
Reasons countries benefit from foreign
trade:
They can import resources
they lack at home.
They can import goods for
which they are a relatively
inefficient producer.
Specialization sometimes
permits economies of largescale production.
Application:
Student A is an academic scholar who almost constantly gets
a GPA of 1.25 every semester. This he is able to get by
allotting 54 hours of study time every week. Supposedly,
student A is also good at dancing and was planning to join
their schools dance troop. On the other hand, B is an average
student who was also planning to join the troop.
Unfortunately, only one of them can be qualified. Moreover,
the troop allots 20 hours for practice weekly. Student A is
undeniably better than Student B in both dancing and
academics. Should Student A join the troop? Explain and
apply the concepts of specialization, opportunity cost,
absolute and comparative advantage and trade.
Answer:
Student A has an absolute advantage over Student B in both
academics and paperwork.
Still, by joining the Dance troop, Student As allotted time for
studying will be reduced to 34 hours every week. If he lets
Student B join the Dance troop instead, he will not be robbed of
time for study and his grades will not be affected in the process.
Even though Student A is both better at academics and
dancing, it is better for him to specialize in academics (if he
wants to maintain his academic standing) in which he has a
comparative advantage, and allow Student B to join the Dance
troop. If he allows the other, there will be trade.
The opportunity cost to Student A of being in the Dance troop
is high. For Student B, who is an average student, the
opportunity costs of being in the Dance troop are lesser.
Trade Barriers
(tariffs, quotas, and subsidies)
Tariff
Non-tariff
Import Quotas
A legal limit on the imported quantity of
a good that is produced abroad and
can be sold in domestic markets
Export Subsidies
Government payments made to
domestic firms to encourage exports.
Closely related to subsidies is
dumping.
A firm or industry sells products on the
world market at prices below the cost of
production.
Domestic Employment
Low foreign wages
Infant Industry
Unfair Trade
National Security
In International Trade
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CS
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Price
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Quantity
ADVANTAGES AND
DISADVANTAGES OF
INTERNATIONAL TRADE
It
the
world
output
and
Disadvantages of
International Trade
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