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Session 2. The Basic Theory Using Demand and Supply. Key Questions About International Trade. Why do countries trade? More precisely, what determines which products a country export and which products it import ?. How does trade effect production and consumption in each country ?.

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Session 2

Session 2

The Basic Theory Using Demand and Supply


Key questions about international trade
Key Questions About International Trade

  • Why do countries trade? More precisely, what determines which productsa country export and which products it import ?

  • How does trade effect production and consumption in each country ?

  • Which country gain from trade ?

  • Which in each country, who are the gainers and losers from opening trade ?


Trade usually results from the interaction of competitive demand and supply
Trade Usually Results from The Interaction of Competitive Demand and Supply.

Demand

What are the factors influencing the demand ?

Supply

What are the factors influencing the supply ?

What will happenif the demandand supply are unmatched ?


Demand and supply for motorbikes

Consumer Surplus Demand and Supply.

Producer Surplus

Demand and Supply for Motorbikes

Consumer Surplus

Producer Surplus


The market for motorbikes demand and supply

Consumer Surplus Demand and Supply.

Producer Surplus

The Market for Motorbikes:Demand and Supply

No-trade Equilibrium


The effects of trade on production consumption and price shown with demand and supply curves
The Effects of Trade on Production, Consumption, and Price, Shown with Demand and Supply Curves

World Pricewith Trade

World Pricewith Trade

Pre-trade Price

Pre-tradePrice

Sf

Sx

Imports

Exports

Dx

Df



The Effects of Trade on Well-Being of Producers, Consumers, and the Nation as a Whole

Which one better ?


One dollar,one vote

The WelfareEffects


Which country gain more
Which Country Gain More ? and the Nation as a Whole

Consumer Surplus

Producer Surplus

Sx= Represent Exporting Country

Sx

Dx = Represent Importing Country

Dx


Gain More and the Nation as a Whole


Importing Country (U.S.) and the Nation as a Whole

Consumers

What if they are rich ?

Take Some Advantages

Producers

What if they are poor ?

Take Some Disadvantages

Exporting Country (The Rest of the Word)

Consumers

What if they are poor ?

Take Some Disadvantages

Producers

Take Some Advantages

What if they are rich ?


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