Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 14-International Trade Part 1, absolute advantages - Coggle Diagram
Chapter 14-International Trade Part 1
free trade - absence of government intervention in international trade; which trade take place without any barrier between individuals,firms or government between countries.
Link Title
Import - when domestic price higher than world price without trade
Export - when domestic price is lower than world price without trade
Ideas of import and export
Absolute and comparative advantages
-ability of a country to produce good with lower resources than other country
It lead to specialisation of production and efficient global allocation of resources
Comparative advantages
ability of country to produce good with lower opportunity cost than other country
It improve global allocation of resources which lead greater output and production. If country’s have lower opportunity cost on a good, that country will produce more on that goods because specialisation.
Calculation opportunity cost-sacrifice one good/gain of the
other good
Resources assume to be fixed
Perfect mobility of resources
Full employment of resources
Free trade
Homogeneous product
Excessive specialisation
Inability to change in structural economic
Ignore transportation cost
Types of Trade Protection
Subsidy
better off
Domestic producer
Domestic employment
worse off
goverment budget
taxpayer-tax revenues spent on subsidy
increase inefficiency
exporting countries
global missalocation
Import Qouta
worse off
domestic consumer
domestic income distribution
increase inefficiency
exporting countries
global misallocation
better off
domestic producer
domestic employment
Tariff
better off-domestic procuders
-domestic employment
-government-tariff
revenues
worse off
-domestic consumer
-domestic income distribution-regressive tax
increased inefficiency in production
inefficient in domestic producer
foreign producer
global misllocation
absolute advantages
