L13Oct09.306

L13Oct09.306 - Lect 13: Trade Flows and Domestic Prices,...

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Lect 13: Trade Flows and Domestic Prices, Economics of Joint Products FRE 306
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Lec 13: World Prices, cif and fob; Joint Products International Trade and Domestic Market Effects W/ open borders, international prices get transmitted to domestic mkt FOB prices: “free on board” Export price received by exporter with product loaded on boat at some export delivery point (excl export tax) Equiv. to world P at price basing point minus transport cost from domestic port to world mkt basing pt like a city, mftg plant, standard delivery point for some quality: North Sea Brent oil f.o.b., #2 yellow corn at Chicago, canola f.o.b. Vancouver, cocoa beans fob Ivory Coast Farmer w/ receive FOB P less transport cost from farm to port of exprt shipment (“export parity price at farm”)
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Joint Products Trade Flows and Domestic Prices 1 Definition of CIF price: “cash, insurance, freight” Landed import price of product, unloaded from boat, having paid freight charges, insurance, and on cash terms Equivalent to world price at price basing point (or other accepted export point) PLUS cost of transport to importing country port, before import tariff applied E.g., Japanese autos priced c.i.f. Vancouver (price incl shipping from Japan, insurance and for cash terms) • For given P w , if a country switches from import basis to export basis, what change in price occurs? Price falls:
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This note was uploaded on 03/09/2010 for the course LFS FRE 306 taught by Professor Barichello during the Winter '09 term at UBC.

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L13Oct09.306 - Lect 13: Trade Flows and Domestic Prices,...

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