Class Notes (835,760)
Canada (509,376)
Economics (806)
ECON101 (300)
Lecture

ECON 101 NOTES: International Economies

2 Pages
88 Views
Unlock Document

Department
Economics
Course
ECON101
Professor
Alexander Gainer
Semester
Fall

Description
SUPPLY AND DEMAND INTERNATIONAL ECONOMICS - Comparative advantage – if one country can make a product at a lower opportunity cost than another country - The world price of a good prevails in the world market - A country has a comparative advantage if the domestic price is less than the world price - In this chapter we assume the domestic price of a product is the opportunity cost - Under free trade the country will export the good iD P W P - No comparative advantage if P D P W - If there is no comparative advantage than under free trade, the country will import the good - Quota – set quantity on what one can import - Free trade – no taxes on imports THE SMALL ECONOMY ASSUMPTION - Assume that a country is a price taker in the world market because their actions don’t affect the world price - In reality only USA impacts the world price, every other country is a price taker - World price is the only relevant price - No seller would accept less than world price, since he/she could sell the good Wor P in world markets - No buyer would pay more than P sDnce he/she could buy the good for P Wn world markets - The domestic price is set by the domestic supply and the domestic demand EXPORTS - When there is a surplus you export - Q S Q D amount exported Without trade With free trade P CS = A+B CS= A A Supply PS= C PS= B+C+D D New equilibrium B Total Surplus= A+B+C Total Surplus= A+B+C+D C Both are better off with free trade, Demand but consumers get less benefits Q IMPORTS - When there is a shortage you import P With free trade - Q – Q = amount imported Supply D S CS= A+B+D A PS= C Without trade Total Surplus= A+B+C+D CS= A B D New equilibrium PS= B+C C Demand
More Less

Related notes for ECON101

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit