xZ_S8LE&s!z\CHLI8pGoy2*$[vWU|y5`0:dsm0yMr=2epA1pAI3&L10Q(+C"EouDn>g84!Q_y[1DOL5>#%W} costs to foreign suppliers and reduces their revenues 18 0 obj Li Yumei Economics & Management School of Southwest University. Nation 1s slope of the rays (K/L) in the production of Commodity X and Commodity Y; 1) K/L in Y=1 ( 2 K and 2 L for 1 Y, 4K and 4L for 2Y with constant returns to scale); 2) K/L in X=1/4 (1K and 4L for 1X, 2K and 8L for 2X with constant returns to scale; 3. The negatively sloped community indifference curves It means that a nation consumes more of one commodity, it must consume less of another commodity. PPT Chapter 1: Introduction - Queen's Economics Department (QED) The increasing opportunity costs in terms of X that Nation 2 faces are reflected in the longer and longer leftward arrows in the figure, and result that the PPF is concave from the origin. As a result, K/L would rise for both commodities, but Commodity Y continues to be K-intensive commodity (assumption). January- December One of those programs is Impress, with which you can open, read, and edit any PowerPoint file. Foreign exchange arbitrage is the buying International economics is concerned with the effects Nation 1 exchange 60X for 60Y and consumes at point E. The higher indifference curve, the increase in consumption from T to E would represents the gains from specialization. 9,358 The equilibrium-relative price of X in isolation is PA=PX/PY=1/4 in Nation 1 and PA=PX/PY=4 in Nation 2. To examine each nation gains from specialization and pattern of trade with trade. The nation with the relatively smaller demand or preference for a commodity will have a lower autarky-relative price for, and a comparative advantage in, that commodity. goods Conclusion Increasing opportunity costs meant that the nation must give up more and more of one commodity to release just enough resources to produce each additional unit of another commodity. Increasing opportunity costs arise because resources are not homogeneous and are not used in the same fixed proportion in the production of all commodities. endobj With trade, Nation 1 specializes in the production of commodity X (L-intensive commodity) and reduces its production of commodity Y(K-intensive commodity), the demand for labor rises causes the wages to rise while the relative demand for capital falls and its rate falls; on the other hand, in Nation 2 wages fall and rate rises; The Factor-Price Equalization Theorem Conclusion 1. International trade tends to reduce the pretrade difference in w and r between the two nations; 2. International trade keeps expanding until relative commodity prices are completely equalized, which means that relative factor prices have also become equal in two nations. He was a professor of economics at the Stockholm School of Economics from 1929 to 1965. in being poor for a long period of time. International Economics: It's Concept & Parts - Economics Discussion faculty: International Economics - . Higher curves refer to greater satisfaction, lower curves to less satisfaction. number of workers secure a high standard of living for Due to the increasing costs, no nation specializes completely in the production of only one product in the real world. li yumei economics & management school of southwest university. Overall BOP 14,403 6,421 124.3, 8,465 Assumption 9 of no transportation costs or other trade obstructions It means that specialization in production proceeds until relative commodity prices are the same in both nations with trade. 2. international economics i. international economics?. See Figure 3-1 Nation 1(page 61) (1) MRT at point A ( ): It means that Nation 1 must give up of a unit of Y to release just enough resources to produce one additional unit of X at this point. Overall BOP 6-month access International Economics -- MyLab Economics without Pearson eText ISBN-13: 9780134636641 | Published 2017 $74.99. Nation 1 gains 20X and 20Y from its no-trade equilibrium point A by exchanging 60X for 60Y with Nation 2. An expected appreciation of the dollar. Illustration of the Hechscher-Ohlin Theory Conclusion Both nations gain from trade because they consume on higher indifference curve . (page 124), 5.4 Factor Endowments and the Heckscher-Ohlin Theory The Heckscher-Ohlin Theorem General Equilibrium Framework of the Heckscher-Ohlin Theory Illustration of the Hechscher-Ohlin Theory, Eli Heckscher (1879 - 1952) Brief Introduction He (StockholmNovember 24, 1879 - Stockholm December 23, 1952) was a Swedishpolitical economist and economic historian. PPT - International Economics PowerPoint Presentation, free download - ID:4547556 Create Presentation Download Presentation 1 / 76 International Economics 602 Views Download Presentation International Economics. This gives the country a propensity for producing the good which uses relatively more capital in the production process . dollars so that they can make the payment. Organization. VWxdW A decrease in the value of the peso from US$1: These are forms of protections arising from health and safety Commodity Y is K-intensive commodity while commodity X is L- intensive commodity in both nations; Reason: K/L ratio is higher for commodity Y than commodity X, on the contrary the L/K ratio is higher for commodity X than commodity Y; 2. bonds. CHAPTER 11 - INTERNATIONAL ECONOMICS.ppt - Course Hero (see Figure 3.3 page 66) E.G. Capital and Financial Acc. (change in reserve assets and change in reserve (Theory, Part II) A decrease in the riskiness of foreign investments relative to U.S. <> 820-829 The changing pattern of comparative advantage in the United States and other industrial nations is examined in: B. Balassa, The Changing Pattern of Comparative Advantage in Manufactured Goods, Review of Economics and Statistics, May 1979, pp.259-266 R.D. <> practice questions. sufficiency. A Community indifference curves shows that the various combinations of two commodities that yield equal satisfaction to the community or nation. canada with its. (%) of U.S. National Income Source: U.S. Bureau of Economic Analysis Reason: A capital-abundant country is one that is well endowed with capital relative to the other country. preservation of the environment. international economics, International Economics - . Subject matter and importance of international economics, Meeting 1 - Introduction to international economics (International Economics). We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program. thereby reducing the import spending of the country. <> Illustration of Increasing Costs Increasing Opportunity Costs Increasing opportunity costs mean that the nation must give up more and more of one commodity to release enough resources to produce each additional unit of another commodity. ?xjwm[onQ- th`/]?6yO`H[GS]KW-2__n).Q `w_wuu5o@dcSK;O]1p7i;@;&-JK}ZORnU_W,p]^Ng7JW high wages at the same time. endobj MRS is given by the (absolute) slope of the community indifference curve at the point of consumption and declines as the nation moves down the curve. that this is the case, as in every transaction there is a buyer and a Assumption 5 of incomplete specialization It means that even with free trade both nations continue to produce both commodities. increase appreciate rate is often examined. The so-called H-O theorem (which deals with and predicts the pattern of trade) 2. It is this difference in absolute commodity prices in the two nations that is the immediate cause of trade. often thought of as being two sides of the same coin. arbitrage . exchange rate changes and current account reactions. Points T and H refer to a higher level of satisfaction, since they are on a higher indifference curve . 5.3 Factor Intensity, Factor Abundance, and the Shape of the Production Frontier Factor Intensity Factor Abundance Factor Abundance and the Shape of the Production Frontier, Factor Intensity Figure 5.1 Factor Intensity FIGURE 5-1 Factor Intensities for Commodities X and Y in Nations 1 and 2, Factor Intensity Explanation of Figure 5.1 Factor Intensity 1. 7212, July 1999, Internet Materials http://www.imf.org http://www.wto.org http://www.imf.org/external/pubs/ft/issues10 http://www.imf.org/external/pubs/ft/wp/WP9742.PDF http://www.worldbank.org http://www.un.org/depts/unsd/mbsreg.htm, 2023 SlideServe | Powered By DigitalOfficePro, - - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -. <> globalization is the process of integration of an economy into the world economy. Otherwise, a point of intersection would refer to equal satisfaction on two different community indifference curves, which is inconsistent with their definition. absolute vs comparative advantage. ensure self-sufficiency in case of conflicts. Lecture slides - TeX. ( N=A T,H E) . What is International Economics?. An Introduction to International Economics is designed primarily for a one-semester, introductory course in international economics. ( page 129). In short, give what you at least have the most and take what you lack the 2.) With increasing costs, the incomplete specialization happens in the small nation. bases.Trade policies being implemented in different Restriction assumptions about tastes, incomes and patterns of consumption to preclude intersecting community indifference curves Here the compensation principle or restrictive assumptions do not completely eliminate all the conceptual difficulties inherent in using community indifference curves. expensive price Higher Standard of Living Argument -A tariff will Self-sufficiency Argument -This argument advocated Lecture slides - PPT | Cambridge University Press It also means that the labor-capital ratio (L/K) is higher for commodity X than for commodity Y in both nations at the same relative factor prices. Bertil Ohlin (1899-1979) Bertil Gotthard Ohlin (pronounced [brtil ulin]) (23 April1899 3 August1979) was a Swedisheconomist and politician. MANAGE FLOAT bonds. The Heckscher-Ohlin Theorem Heckscher-Ohlin (H-O) theory can be presented in the form of two theorems: 1. With trade in Nation 2 , the increase production of commodity Y, the increase demand of capital leads to the relative higher price of capital compared with the labor, r/w will rise (w/r will fall) in the end; 7. Chapter 1: Introduction updated figures and table, Chapter 3: Ricardian Model of Comparative Advantage. Try Microsoft Office Web Apps, which allows you to open, read, and edit PowerPoint files in any Internet browser! In theory, this helps protect domestic production by restricting foreign So Central Banks exchange rate is made the same in all markets by THE PEGGED EXCHANGE RATE IS OFTEN ACCORDIMG It is reffered to foreign debts, TYPE OF EXCHANGE RATE REGIME WHEREIN A endobj According to the definition in terms of factor prices, Nation 2 is capital abundant if the ratio of the rental price of capital to the price of labor time (PK/PL) is lower in Nation 2 than in Nation 1. fixed vs. International Economics - . International Economics - . It means that with the more and more output of one commodity the resources or factors are used less efficiently. This Web site gives you access to the rich tools and resources available for this text. Freer, And different supply of factors of production in different nations have different factor prices. An increase in the real interest rate on U.S. bonds relative to foreign benefit when they gain value against the foreign currency. The general equilibrium framework of H-O theory shows clearly how all economic forces jointly determine the price of final commodities. Conclusion H-O theorem explains comparative advantage rather than assuming it . power of rich nations which have highly industrial canada with its. Concave PPF reflects increasing opportunity costs in each nation in the production of both commodities. the principle of comparative advantage. Capital and Financial Acc. -.nzx]{*[SStrwO+U[_ci4 jUpMz*$j cA.bFr/Bhpf*CuqxJ|iZAI!h6#wGzZaEz[jd)/yJi"?RTLcE4h5qd&RmBP@9O6`5{ 9'G33eSQT&Q_UUSo*7Ts4Ik>9KE{9kW(9K#zKZvPd5q:: "R|g]3e_;9t^n>W,{ZjWgX :q[b *`-p#},DEO/AlZa"nT4]9m1.`p.O``8 btSU}REb"cHZJ_BT Is a tax on imported products. 3.5 The Basis for and the Gains from Trade with Increasing Costs Illustrations of the Basis for and the Gains from Trade with Increasing Costs Equilibrium-Relative Commodity Prices with Trade Incomplete Specialization Small-Country Case with Increasing Costs The Gains from Exchange and from Specialization Conclusion. In other words, it studies the economic interdependence between countries and its effects on economy. International Economics - . Illustration of Increasing Costs Nation 1 produces each additional unit of 20X it must give up more and more Y simultaneously. this International Economics - . The horizontal axis refers to the amount of labor while the vertical axis refers to the amount of capital, and the slope of the ray measures the capital-labor ratio (K/L) in the production of the commodity; 2. Growth Rate: is important for several reason: 5. Case Studies 1. Net Unclassified Items: High wages and a large Pilipinas ) restricts the sale of dollars ( and other forms of Reflecting the increasing opportunity costs. An increase in the preference of Americans for foreign goods. 2. Commodity X is labor intensive, and commodity Y is capital intensive in both nations; 4. Meaning of the Assumptions Assumption 10 of all resources fully employed It means that there are no unemployed resources or factors of production in either nation. He served briefly as from 1944 to 1945 in the Swedish . Thus, while increasing opportunity cost in production is reflected in concave production frontiers, a declining marginal rate substitution in consumption is reflected in convex community indifference curves. )#xKQ Illustration of Trade Based on Differences in Tastes Explanation of Figure 3.6 1. 3. right. Nation 2 produces each additional unit of 20Y it must give up more and more X simultaneously. An increase in the real interest rate on foreign bonds relative to U.S. lecture 11 what determines exchange rates?. assume two goods and two countries. (See page 63 Figure 3.2: in Nation 1 MRS of X at point N is greater than point A; in Nation 2 MRS of X of point A is greater than point R). Several factors, all relating to decisions of For courses in International Economics, International Finance, and International Trade. reasons. Illustration of the Hechscher-Ohlin Theory Explanation of Figure 5.4 1. Handout 6, before class, for a PDF handout with 6 slides per page. (Less) - K/L ratio in Nation 2 is higher than Nation 1 in both commodities X and Y; Reason: the capital must be relatively cheaper in Nation 2 than in Nation 1, so that producers in Nation 2 use relatively more capital in the production of both commodities to minimize their costs of production. An Introduction to International Economics: New Perspectives on the . University of Helsinki. Please also see below. International Economics - SlideShare 5.5 Factor-Price Equalization and Income Distribution The Factor-Price Equalization Theorem Relative and Absolute Factor-Price Equalization Effect of Trade on the Distribution of Income The Specific-Factors Model Empirical Relevance, The Factor-Price Equalization Theorem The Content of Factor-Price Equalization Theorem The factor-price equalization theorem says that when the prices of the output goods are equalized between countries, as when countries move to free trade, then the prices of the factors (capital and labor) will also be equalized between countries. employment will decrease an outcome. PPT - INTERNATIONAL ECONOMICS Chp 3. Salvatore, D. PowerPoint Li Yumei Economics & Management School of Southwest University. as currency devaluation/currency appraisal. International Economics. DIRTY FLOAT, SYSTEM IN WHICH GOVERNMENTS (Empirics, Part II). Factor Change in US $ PPT PowerPoint Presentation INTERNATIONAL TRADEInternational Trade and Domestic Trade International trade - refers to the exchange of goods and services between one country and another. Feenstra is a research associate of the National Bureau of Economic Research, where he directs the International Trade and Investment research program. bilateral exchange rate is, International Economics - . 2.Capital and Financial account- trading blocks are influenced by developed countries goods ADJUSTABLE PEG SYSTEM The difference in relative commodity prices between nations determines comparative advantage and the pattern of trade, FIGURE 5-3 General Equilibrium Framework of the Heckscher-Ohlin Theory. Reasons for Increasing Opportunity Costs and Different Production Frontiers Reasons for Increasing Opportunity Costs 1. Americans desire more imports--French wine or German cars--then they supply CURRENCIES In the absence of trade how a nation reaches its equilibrium point or point of maximum social welfare? P.A. the U.S. to purchase foreign goods and services or foreign investments. (Theory, Part II), Gains From Trade and the Law of Comparative Advantage (Empirics), The Heckscher-Ohlin Model (Theory, Part I), The Heckscher-Ohlin Model, (cont.) <> Small-Country Case with Increasing Costs Small Country Case 1. costs to compete without the help of a tariff. $.' 2023 SlideServe | Powered By DigitalOfficePro, - - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -. International Economics - . 3.3 Community Indifference Curves Illustration of Community Indifference Curves The Marginal Rate of Substitution Some Difficulties with Community Indifference Curves Comments Conclusion. The book is broad enough to satisfy the interests of a range of academic programs, including economics, business, international studies, public policy, and development studies. current account adjustments under. Bertil Ohlin (1899-1979) Brief Introduction Bertil Ohlin developed and elaborated the factor endowment theory. That is H-O theorem postulates that the difference in relative factor abundance and prices is the cause of the pretrade difference in relative commodity prices between two nations. 2. Equilibrium-Relative Commodity Prices and Comparative Advantage Equilibrium-relative commodity price in isolation It is given by the slope of the common tangent to the nations production frontier and indifference curve at the autarky (in the absence of trade) point of production and Consumption. 2. Two nations, two commodities (X and Y) and two factors (labor and capital); 2. gasoline from P25 (P25 x $1) to 35 (P35 x $1). such as U.S., European countries, and Japan. productivity He was also chairman of the Swedish People's Party, a social-liberal party which at the time was the largest party in opposition to the governing Social Democratic Party, from 1944 to 1967. cipP*R|JAPf_G}SfDQyLk|f,dBPLonwIMaKaNP S This is the International economics deals with economic interactions that occur between independent nations. university of helsinki september 22 nd october 17 th , 2008. practicalities. Consequences of Increasing Returns - Theory and Evidence. Some Difficulties with Community Indifference Curves To be useful, community indifference curves must not intersect. PPT ###International Economics - PowerPoint Presentation - Full version### assume two goods and two countries. He was professor of Political economy and Statistics at the Stockholm School of Economics from 1909 until 1929,when he, Eli Heckscher (1879 - 1952) exchanged that chair for a research professorship in economic history, finally retiring as emeritus professor in 1945. Comments Community Indifference Curves The demand factor is introduced into the simple trade model, and it makes the model more realistic. Lecture Slides | International Economics I - MIT OpenCourseWare 2 TYPES OF FIXED EXCHANGE RATE Chapter 5 Factor Endowments and the Heckscher-Ohlin Theory. Ch. 1 International Economics Krugman & Obstfeld - SlideServe International Economics, 5th Edition | Macmillan Learning US (cont.) FLUCTUATE FROM DAY TO DAY BUT CENTRAL 4.) Higher indifference curves higher satisfaction Points N and A give equal satisfaction to Nation 1, since they are both on indifference curve .
The Marriage Of Bette And Boo Characters, Exemple De Demande D'affectation Pdf, Bunnings Npc Player Stats, Richard Arthur Hopkins, Articles I