Dr. Clayton Thyne PS 235-001: World Politics Spring 2009 Goldstein & Pevehouse, International Relations, 8/e Student notes version
Theories of Trade
International trade amounts to a _ of the total economic activity in th
International Trade Theory
International Trade Theory
What is international trade?
Exchange of raw materials and manufactured
goods (and services) across national borders
Classical trade theories:
explain national economy conditions-country
Unequal Development: the
Chicken or the Egg
Why is there uneven development?
Why doesnt Papua New Guinea
just buy mechanized farm
equipment? Or build factories? Can
PNG afford to?
Are LDCs poor because they are
not developed? Or not developed
INTERNATIONAL BUSINESS, TACTICS
DR. KIP BECKER
The History of the Silk Road
the Silk Road
And the Phoenicians BC
TO GROW NATIONs MASSED WEALTH AT @
EXPENSE OF OTHERS
"Using the Wake Forest Experience As A
Catalyst For Thinking Through How
Ubiquitous Laptop Computers Might
Change Teaching and Research at Pitt"
A discussion led by
David G. Brown, Professor of Economics
Vice President and Dean
International Center for Co
A Tale of Two Tribes
On an island, there lived
two isolated tribes,
In order to survive, they needed to
catch fish from the sea and collect
wood from the forest. There were 20
workers in each tribe.
In one day,
the workers of Engia could co
OECD TRADE INDICATORS
Statistical analysis of international
trade and production:
towards a scoreboard of indicators
Lelio Iapadre (University of LAquila and
National Institute for Foreign Trade, Italy)
Alessia Proietti (National Institute for For
Benefits to Bilateral Trade and
Investment from the ROC-Panama FTA
Bureau of Foreign Trade
Ministry of Economic Affairs
The introduction of the ROC-Panama FTA
The economic benefits of the ROC-Panama FTA for
The economic ben
SESSION 16: ABSOLUTE ADVANTAGE & COMPARATIVE ADVANTAGE
AND INTERNATIONAL TRADE
Absolute Advantage & Comparative Advantage
1. Trade increases the value society receives from a given or fixed amount of
goods and services because both traders
Absolute Advantage vs
Absolute Advantage the ability to produce
more of a given product with the same amount of
If Joe can mow 3 lawns in an hour and Pete can
mow 2 lawns in an hour, Joe has the absolut
The Logic of Free Trade
Self-sufficiency is nice but
Advantages of doing things ourselves
Good information about quality
Dont need to depend on others and their foibles
Can customize the product
Can coordinate production a
Theory of Comparative Advantage
The theory of comparative advantage
was first proposed by Ricardo
countries should specialize in producing
those goods of which they are relatively
more efficient producers
these countries should then trade with the
Every Choice Has a Cost
There is no such choice
as a free choice
Define alternatives as different ways to
achieve a goal
Identify the opportunity cost of choosing
The Cost of a Choice
What will you (did
The most powerful force in the
universe is compound interest
The Power of Compound
A Native American tribe accepted goods worth 60
guilders for the sale of Manhattan in 1626.
Opportunity Cost and Production Possibilities
The opportunity cost of any choice
is what we give up when we make
The opportunity cost of any good or service
is its value in its next best alternative use.
Because people cannot have everything
they want, they face trade-offs, or
People often think of cost in terms of dollars.
To an economist, however, cost often means
Aim: How does evaluation of
comparative and absolute advantage
help explain why nations trade?
DEFENITION OF TERMS
Why do nations trade?
You could saythat globalization, driven not
by human goodness but by the profit motive,
has done far more goo
Comparative Advantage and Trade Barriers
Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those
of the Federal Reserve Bank of Dallas or the Federal Reserve System.
Choice and Opportunity Cost
Scarcity forces us to make choices among a
limited set of possibilities
Study the logic of rational choice among
Under scarcity, deciding to have more of
one good or service means deciding to have
All economic questions and problems arise from
scarcity. Economics assumes people do not have
the resources do satisfy all of their wants.
Therefore, we must make choices about how to
allocate those resources. We make decisions about
Scarcity and Opportunity Costs
Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of
the Federal Reserve Bank of Dallas or the Federal Reserve System.
(1) Economics. The student understands th
Tuesday, Aug. 30
Economics of Natural Resources, Energy, and the Environment ECP 3302
Introduction to the course:
What is environmental & natural resource economics; why study it?
Economics studies the allocation of scarce resources (like land, labor, cap
Thurs., Sept 1
Economics - study of the allocation of scarce resources among alternative uses.
Resources in economics factors of production, traditionally land, labor, capital;
Used to produce goods and services that provide
ues., Sept. 6 Markets cont
1. Summary of market and nonmarket goods (from last week):
Natural monopoly goods
Common property (open access)
2. Markets - Supply and demand; equilibriu
Thurday, Sept. 8
Law of Demand: Price and quantity demanded (Qd) are inversely (or negatively) related
- as price rises, quantity demanded falls.
Law of Supply: Price and quantity supplied (Qs) are directly (or positively) related - as
The benevolence of self-interest
Critics of economics often accuse the discipline of viewing
people as mere optimising machines, as ethical nonentities.
The charge would be serious if it were truebut it is in fact
Dec 10th 1998
HOW can economists ex
Tuesday, Sept. 13
lasticity - Responsiveness of quantity to change in price.
a. Price elasticity of demand - % change in Qd / % change in P
Calculation of price elasticity of demand:
Use arc elasticity formula: e = (Q2 - Q1)/(Q1 + Q2)/2
(P1 - P2)/(P1
Thursday, Sept. 15
1. What do the various parts of the supply/demand diagram represent?
a. Price x Quantity = Total Revenue, or total expenditure
b. TR -Total cost = profit
c. Area under demand curve reflects benefits to demanders.
d. Area under supply cu