lecture8 - Introductory Microeconomics LECTURE 8 Welfare...

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Introductory Microeconomics LECTURE 8 – Welfare and Markets 2: International Trade 1. Administrative issues Assignment 1 due on April 12: (i) Need to submit in pdf format; do not use colors in the graphs; label all your graphs. (ii) Word limit. (iii) Tutor consultations/OLT. (iv) Check ‘Assessments’ link on LMS for hints and samples. 1
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2. Review of last lecture (1) How well-being is measured? • The basic measure: Total surplus to society = CS + PS • Efficiency (quantity traded that maximizes total surplus) and PC market equilibrium. (2) Applications: • How we can use welfare analysis to evaluate government policy. 2
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2. Overview of Lecture 8 – International trade • Representing international trade in the demand/supply model. • How does trade affect well-being? • What is the effect of government intervention on market outcomes and well-being? (Consider some recent examples.) • Application: Globalization and well-being. 3
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The importance of international trade: 0 10 20 30 40 50 60 70 80 Australia World China Figure: Trade as a percentage of GDP, 1960 to 2012 Source: World Bank, World Development Indicators 4
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Price Qty S D Q* P* 3. International trade in the demand/supply model a. No international trade 5
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b. Why do we have international trade?
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