1 / 7

International Trade

International Trade. The Gains from Trade. The law of comparative advantage specialisation as the basis for trade absolute advantage comparative advantage the gains from trade based on comparative advantage. Production possibilities for two countries. Pre-trade exchange ratios.

ami
Download Presentation

International Trade

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. International Trade

  2. The Gains from Trade • The law of comparative advantage • specialisation as the basis for trade • absolute advantage • comparative advantage • the gains from trade based on comparative advantage

  3. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios (LDC exports wheat: DC exports cloth) Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth

  4. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios (LDC exports wheat: DC exports cloth) Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth

  5. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios (LDC exports wheat: DC exports cloth) Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth

  6. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios (LDC exports wheat: DC exports cloth) Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth

  7. The Gains from Trade • The limits to specialisation and trade • The terms of trade • PX/PM • Other reasons for gains from trade • decreasing costs • differences in demand • increased competition • trade as an ‘engine of growth’ • non-economic advantages

More Related