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International Trade Models. ECN 3891 International Economics - Honors. Why Nations Trade. International trade provides us with a variety of goods and services from other countries; International trade promotes specialization and efficiency in production; and

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International trade models

International Trade Models

ECN 3891

International Economics - Honors


Why nations trade
Why Nations Trade

  • International trade provides us with a variety of goods and services from other countries;

  • International trade promotes specialization and efficiency in production; and

  • International trade provides a source of income and employment for the countries involved


Production possibilities frontier
Production Possibilities Frontier

Consumer Goods

Production Possibilities Frontier (PPF) shows all possible combinations of two products (Consumer Goods and Capital Goods) that a country can produce with available technology and full employment of all resources.

PPF

0

Capital Goods



Indifference curves

Indifference Curves

An Indifference Curve represents all combinations of market baskets that provide a consumer with the same level of satisfaction.


Characteristics of indifference curves
Characteristics of Indifference Curves

  • Indifference curves are continuous and every- where dense;

  • Indifference curves slope downward to the right; and

  • Indifference curves do not intersect;

C

U2

U1

K

0


General equilibrium
General Equilibrium

C

E

CE

U

PPF

K

O

KE