文档介绍：Application: International Trade
Chapter 9
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International Trade
What determines whether a country imports or exports a good?
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?
Equilibrium Without Trade
Assume:
A country is isolated from rest of the world and produces steel.
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.
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:
Domestic price adjusts to balance demand and supply.
The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive.
World Price parative Advantage
If the country decides to engage in international trade, will it be an importer or exporter of steel?
World Price parative Advantage
The effects of free trade can be shown paring 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.
World Price parative Advantage
If a country has parative advantage, then the domestic price will be below the world price, and the country will be an exporter of the good.