Chapter 9 Lecture Outline - Economics 101H Vandan Desai...

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Economics 101H Vandan Desai P a g e | 1 Chapter 9: Application – International Trade (Lecture Outline) -------------------------------------------------------------------------------------------------------------------------- I. The Determinants of Trade A. The Equilibrium without Trade i. Assume: A country isolated from rest of the world and produces steel The market for steel consists of the buyers and sellers in the country No one in the country is allowed to important or export steel ii. Results: Domestic price adjusts to balance demand and supply The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive B. The World Price and Comparative Advantage i. If the country decides to engage in international trade, will it be an importer or exporter of steel? ii. The effects of free trade can be shown by comparing the domestic price of a good without trade and the world price of the good iii. World Price: price that prevails in the world market for that good World Price > Domestic Price = Export (Has Comparative Advantage) World Price < Domestic Price = Import iv. Trade among nations is ultimately based on comparative advantage
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This note was uploaded on 10/31/2010 for the course ECON 202 taught by Professor - during the Fall '08 term at Community College of Baltimore County.

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Chapter 9 Lecture Outline - Economics 101H Vandan Desai...

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