AEM_ECON_2300_Lecture_5____Spring_2009

AEM_ECON_2300_Lecture_5____Spring_2009 - Lecture 5 Gains...

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Professor David Lee AEM 2300 / ECON 2300 1 Lecture 5 AEM 230 / ECON 230 Gains from trade Exporting country International market Importing country S B D B Q A Q T Q B P P P S A D A ES A ED B Consumers Producers Country Consumers Producers Country -a +(a+b) +b +(c+d) -c +d b+d d b a b c d Q* P* P A P B Global welfare change
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Professor David Lee AEM 2300 / ECON 2300 2 Lecture 5 AEM 230 / ECON 230 P Q T ES A Large country Exporter and importer ED B P* International market Importer gains Exporter gains
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Professor David Lee AEM 2300 / ECON 2300 3 Lecture 5 AEM 230 / ECON 230 Elasticity of demand More elastic D D’ P Q D P Q D D’ More inelastic D
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Professor David Lee AEM 2300 / ECON 2300 4 Lecture 5 AEM 230 / ECON 230 Elasticity of supply P Q S S’ More inelastic S P Q S S’ More elastic S
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Professor David Lee AEM 2300 / ECON 2300 5 Lecture 5 AEM 230 / ECON 230 Gains from trade with more elastic exporter supply Exporting country International market Importing country S B D B Q A Q T Q B P P P S A D A ES A ED B d b’ a’ b’ c d Q* P* P A P B ES’ A S’ A P’ A
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Professor David Lee AEM 2300 / ECON 2300 6 Lecture 5 AEM 230 / ECON 230 P Q T ES A Exporter and importer gains more elastic excess supply curve ED B P* International market ES’ A
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Professor David Lee AEM 2300 / ECON 2300 7 Lecture 5 AEM 230 / ECON 230 Gains from trade with more inelastic importer demand
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