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Unformatted text preview: Econ Notes Chapter 9 Application: International Trade The Determinants of Trade (Examining the steel market in the imaginary country, Isoland) o The Equilibrium Without Trade What happens to the price and quantity of steel if Isoland begins to trade? Who will gain money and who will lose money/Is it worth it? Should a tariff be imposed? o The World Price and Comparative Advantage Will Isoland be an importer or exporter of steel? WORLD PRICE is the price prevailing in the world markets If the world price is higher than the domestic price, they will export, so that they will have a comparative advantage The Winners and Losers From Trade Isoland is a small economy, having little effect on world markets o The Gains and Losses of an Exporting Country Trade forces the domestic price to raise to the world price To measure gains and losses, pay attention to changes in consumer/producer surplus When a country begins to export, consumers become worse off,...
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This note was uploaded on 04/21/2008 for the course ECO 201 taught by Professor Dunlevy during the Spring '08 term at Miami University.
- Spring '08