lecture2trade - ³´³³·º¶¶³ µ¸ ² COUNTRY B ±...

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LECTURE 2: A SUPPLY AND DEMAND APPROACH TO TRADE A. SOME BASIC ANALYTICAL TOOLS: I. DEMAND AND CONSUMER SURPLUS II. SUPPLY AND PRODUCER SURPLUS III. ECONOMIC SURPLUS (INCLUDING TAX PAYER EFFECTS) B. A ONE COMMODITY MODEL OF THE EFFECTS OF TRADE: I. AUTARKY EQUILINRIUM AND CONSUME AND PRODUCER SURPLUS II. TRADE WITH AN EXPORTABLE COMMODITY AT FIXED WORLD PRICES (WORLD PRICES ARE AXOGENOUS) III. TRADE WITH AN IMPORTABLE COMMODITY AT FIXED WORLD PRICES IV. EXCESS SUPPLY AND EXCESS DEMAND (A TWO COUNTRY, ONE COMMODITY, PRICE ENDOGENOUS MODEL) V. WELFARE EFFECTS OF TRADE IN A TWO COUNTRY, ONE COMMODITY MODEL (a) COUNTRY WIDE WELFARE EFFECTS (BOTH GAIN IN TERMS OF TOTA ECONOMIC SURPLUS) (b) DISTRIBUTION OF WELFARE EFFECTS WITHIN EACH COUNTRY
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A SIMPLE TWO COUNTRY-ONE COMMODITY EXAMPLE:
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Unformatted text preview: ³´³³·º¶¶³ » µ¸ ² COUNTRY B: ± ¼ ³´ ³³½¶¶ ·³³¸ ¼ ; ¹ ¼ ³´³³·µ¶¶³ » ¸ ¼ Find the no-trade (autarky) equilibrium prices and quantities in each country. Calculate the excess supply and demand curves for each country (which country will export the good if trade occurs and which country will import it?). Find the trade equilibrium price and traded quantity between the two countries using the excess supply and demand curves. Find the domestic quantities supplied and demanded in each country after trade takes place. Find consumer and producer surplus changes in each country as a result of trade. Now, are there net gains from trade in each country? Are there winners and losers? What does your analysis tell you about the politics that surrounds international trade issues?...
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