ECN Notes Section 2
Jargon: Producer Surplus (PS): The areas below the price and above the supply curve.
Consumer Surplus (CS): The areas below the demand curve and above the price.
Dead-weight Loss (DWL): The areas of surplus that would be available unde
Good economists know that every voluntary exchange is mutually
Those who voluntarily exchange with each other do so because
each receives something they value more highly than what they
Mutually beneficial voluntary ex
DEMAND AND MARGINAL VALUE
If we assume the price is the same for all units purchased
Demand is a relation indicating the maximum price buyers will pay
for any given quantity over a given period of time, all other
influences being constant.
Tariffs are taxes that are placed on imports. They are usually intended to raise the final price of
the imported good or to raise tax revenue for the government. Because of this, tariffs are likely
to cause home producers of th
The flow of inputs from one political zone to another political zone.
Example, Mariel Boat Lift. This is a reason to believe that in some cases wages are irresponsible
Capital frictions (partial list):
exchange rate risk
Labor frictions: (partial list):
Any of these restrictions would push back agains
Capital and Labor Mobility:
The model of capital and labor mobility builds on the Specific Factors by relaxing one more
assumption: factor mobility. It allows us to analyze what happens to trading patterns between
countries when resour
Those countries with a great deal of capital also seem to export labor-intensive goods. This
seems to contradic the Heckscher-Ohlin model. However, there might be a number or reasons
that the data Leontieff uses unde
"Since the Industrial Revolution, economic advance has been associated with manufacturing
prowess. Even in today's digitised world, humanity advances by making more and better things.
Our horseless carriages are packed with computers;
Without trade, self-sufficient country. A country that is in autarky is fully closed to trade.
Equilibrium (S-F model):
The tangent point on the PPF where the highest indifference level is obtained (prior to trad
Two Sector Labor Model:
This mode demonstrates how one factor, Labor, switches between the two sectors in the
economy. The factors which are better suited to a particular sector, for example agriculture, are
more productive for product
The specific factors model is one step away from the Ricardian model toward a more realistic
approach to trade. We give up a bit of simplicity for a bit more reality. Basically, the specific
factors model lets us see w
SUPPLY AND DEMAND: MARKET EQUILIBRIUM
To paraphrase a quote by economist Thomas Sowell.
For a lot of people out there, asking them where prices and wages
come from is like asking a four-year-old where babies come from.
Remember the quote:
"It is no crime