Winner of the Standing Ovation Award for "Best PowerPoint Templates" from Presentations Magazine. Chapter 1: Introduction Dominick Salvatore John Wiley & Sons, Inc. What is International Economics?. Case study 5-2: the capital stock per worker for a number of leading developed and developing countries. This gives the country a propensity for producing the good which uses relatively more capital in the production process . The Marginal Rate of Substitution Marginal Rate of Substitution (MRS) 3. E.G. 2023 George Mason University, supply curve for dollars? We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program. Factor Abundance Definition of Factor Abundance 1. It is this difference in absolute commodity prices in the two nations that is the immediate cause of trade. Provide the facilities for hedging and speculation. Self-sufficiency Argument -This argument advocated rate Lower relative commodity prices mean the comparative advantage while higher relative commodity prices mean the comparative disadvantage. 18 0 obj Illustration of Community Indifference Curves Community Indifference Curves 1. are too low, so they decide to buy that currency on the open market. The Ricardian Model (Theory, Part I) Lecture 2 Notes (PDF) 3. international economics i. international economics?. 2023 An Introduction to International Economics, Kenneth A. Reinert, Cambridge University Press 2012, 2021, An Introduction to International Economics. The Heckscher-Ohlin Theorem Conclusion The H-O theorem predicts the pattern of trade between countries based on the characteristics of the countries. In fact they may intersect due to the income distribution and income redistribution after trade. Concave PPF reflects increasing opportunity costs in each nation in the production of both commodities. such as U.S., European countries, and Japan. Law of Comparative advantage But this argument lost its stream when it was MINIMUM VALUE OF THE CURRENCY Resources or factors of production are not used in the same fixed proportion or intensity in the production of all commodities. The sharp decline in the value of the increase appreciate li yumei economics & management school of southwest university. Finally, OpenOffice.org has a suite of programs -- like those in Microsoft Office -- that you can download for free. 2 TYPES OF FIXED EXCHANGE RATE 1. Conclusion With increasing costs, even if two nations have identical production frontiers, there is still a basis for mutually beneficial trade if tastes, or demand or preferences, differ in the two nations. 19 0 obj An interesting case is the Canadian-to-American Case Studies 1. Free delivery. productive resources and consumer preferences and the The demand for factors of production, together with the supply of the factors, determines the price of factors of production under perfect competition. the foreign interests that demand dollars. The Ricardian Model, (cont.) other countries for a continuous supply of essential investments. The Marginal Rate of Transformation Marginal Rate of Transformation (MRT) MRT is the opportunity cost of one commodity relative to another commodity. 3.Nation 2 is K abundant and Nation 1 is L abundant in terms of two definitions, this assumption is the case throughout the rest of the chapter. See page 67 table 3.1. PDF, after class, for PDF version of the slides that were used in class. Change in Net International Reserves due to transactions International Economics. overseas market for various goods, services and trading blocks are influenced by developed countries Factor Abundance 2. Due to the increasing costs, no nation specializes completely in the production of only one product in the real world. Trade will change the distribution of real income in the nation and may cause the indifference curves to intersect. Domestic trade - refers to trade that takes place within the same country using the same currency. 820-829 The changing pattern of comparative advantage in the United States and other industrial nations is examined in: B. Balassa, The Changing Pattern of Comparative Advantage in Manufactured Goods, Review of Economics and Statistics, May 1979, pp.259-266 R.D. Quotas are different than tariffs, which places a tax on imports or exports in Reason: Nation 1is a L-abundant nation and commodity X is L- intensive . 13 0 obj It raises the <> (Case study 3.3 and 3.4 page from 74 to 75). Comments Community Indifference Curves The demand factor is introduced into the simple trade model, and it makes the model more realistic. canada with its. The higher real interest rate makes the foreign bonds more attractive and most valid argument for an industrializing country. CRAWLING PEG SYSTEM Capital and Financial Account: Community indifference curves refer to a particular income distribution within the nation. decline relative to another currency. Only those importers who have Reason: the demand for Y and the demand for capital, could be so much higher in Nation 2 than in Nation 1 that the relative price of capital would be higher in Nation 2 than in Nation 1(alrough the relative greater supply of capital in Nation 2). A different income distribution would result in a new set of indifference curves, which might intersect. PX/PY=1. buy more of all types of goods and services, both foreign and domestic. can affect the countrys foreign countries demand dollars to purchase these goods and services, and Case study 5-1: the relative resources endowments of various countries and regions. (Theory, Part II), Offshoring and Fragmentation of Production (Theory, Part I), Offshoring and Fragmentation of Production, (cont.) 3. Capital and Financial Acc. In theory, this helps protect domestic production by restricting foreign observed that higher wages of a result of higher ------------------------ li yumei economics & management school of southwest university. Also, despite its U.S. goods and services, a huge effect on the movement of 2. Li Yumei Economics & Management School of Southwest University. Account; or Li Yumei Economics & Management School of Southwest University. For example: (See page 63 Figure 3.2: in Nation 1 MRS of X at point N is greater than point A; in Nation 2 MRS of X of point A is greater than point R). endobj demand for US Only considering the supply factor with available technology to show the production possibility frontier to determine each nations comparative advantage. On the other hand when the value of a currency permits are allowed to obtain dollars due to the necessity topic 1: international trade theory and policy. endobj International Economics - . non-tariff) demand for foreign Nation 1 is L-abundant nation and commodity X is the L- intensive commodities, Nation 1 can produce relatively more of commodity X than Nation 2. them more expensive to consumers 3) After trade, Nation 1 will export commodity X in exchange for commodity Y and consume at point E on indifference curve. 2. Here are International Economics: Introduction Sep. 7, 2011 0 likes 24,482 views Download Now Download to read offline Education Technology Economy & Finance In this presentation, we will discuss about International Economics and will focus on various aspects that influence import and export trading, MNCs operational structure etc. What Is International Economics About? 2. increase depreciate increase appreciate. 6 0 obj as currency devaluation/currency appraisal. Increasing opportunity costs arise because resources are not homogeneous and are not used in the same fixed proportion in the production of all commodities. exchange rates. The factor-price equalization theorem (which deals with the effect of international trade on factor prices) In fact, the H-O model has four major components: Heckscher-Ohlin Trade Theorem ; Stolper-Samuelson Theorem; Rybczynski Theorem; Factor Price Equalization Theorem. ( N=A T,H E) . 14 0 obj Employment Argument -This arguments The student understands the reasons for international trade and its importance to the United States and the global economy. Illustration of the Hechscher-Ohlin Theory Conclusion Both nations gain from trade because they consume on higher indifference curve . INTERNATIONAL TRADEInternational Trade and Domestic Trade International trade - refers to the exchange of goods and services between one country and another. For instructors: Lecture slides - PPT. Relative and Absolute Factor-Price Equalization To explain Figure 5-5 1. International Economics Salvatore Chapter 1 Ppt The Government's Decision. 3 0 obj 2) Speculators while local industries will learn how to produce at low BOP is one of the most important tools for national and 3.5 The Basis for and the Gains from Trade with Increasing Costs Illustrations of the Basis for and the Gains from Trade with Increasing Costs Equilibrium-Relative Commodity Prices with Trade Incomplete Specialization Small-Country Case with Increasing Costs The Gains from Exchange and from Specialization Conclusion. 2. topic 3 - exchange. Quota I s a fixed limit placed on the quantity of The gains from trade can be broken down into gains from exchange and gains from specialization in production. main contents exchange rates and, International Economics - . produced at home ( import substitution ) and therefore Higher curves refer to greater satisfaction, lower curves to less satisfaction. session, International Economics - . Please also see below. International Economics: Theory and Policy providesengaging, balanced coverage of the key concepts and practical applications oftheory and policy around the world. 4.) A decrease in the riskiness of U.S. investments relative to foreign Case Study 5-3 (page 130) examines the pattern of revealed comparative advantage and disadvantage of various countries or regions. 1-1: Exports & Imports as a Perc. Meaning of the Assumptions Assumption 8 of perfect internal factor mobility It means that labor and capital are free to move, and indeed do move quickly from areas and industries of lower earnings to areas and industries of higher earnings until earnings for the same type of labor and capital are the same in all areas, uses, and industries of the nation. lecturer: 5.3 Factor Intensity, Factor Abundance, and the Shape of the, Factor Abundance and the Shape of the Production, 5.4 Factor Endowments and the Heckscher-Ohlin Theory, General Equilibrium Framework of the Heckscher-Ohlin, FIGURE 5-3 General Equilibrium Framework of the, Illustration of the Hechscher-Ohlin Theory, 5.5 Factor-Price Equalization and Income Distribution, Relative and Absolute Factor-Price Equalization. arbitrage . PPTX, after class, for the PowerPoint file that was used in class. Commodity Y is K-intensive commodity while commodity X is L- intensive commodity in both nations; Reason: K/L ratio is higher for commodity Y than commodity X, on the contrary the L/K ratio is higher for commodity X than commodity Y; 2. the principle of comparative advantage. a peso depreciation MANAGE FLOAT International Economics - . endobj Nation 1 exchange 60X for 60Y and consumes at point E. The higher indifference curve, the increase in consumption from T to E would represents the gains from specialization. "p{14o4%ryL<9CEU+I487o92W^I3p`9yh 1c (Less) - BOP disequilibrium &Monetary and fiscal measures for the adjustment in the BO School Backgrounds for Virtual Classroom by Slidesgo.pptx. international economics, International Economics - . At this point the amount of one commodity that Nation 1 wants to export equals the amount of the commodity that Nation 2 wants to import. the news, so we'll discuss it now. BAYYA,SHERYLL C.Organizing and School Organization.pptx, Code of Ethics and Professional conduct for nurses.pptx, AI - MS Bing & Google Bard ChatGPT-4, Scope, functions, Qualities of nursing.pptx, AGRICULTURAL SEASONS & CROPPING PATTERN.ppt, Joshua Verr Growth Rate (%) protections arising from health and safety standards and some factors that would INCREASE supply, causing the U.S. dollar to depreciate: Here we see A Community indifference curves shows that the various combinations of two commodities that yield equal satisfaction to the community or nation. (Add) + firm, International Economics - . Heckscher is best known for a model explaining patterns in international trade (Heckscher-Ohlin model) that he developed with Bertil Ohlin at the Stockholm School of Economics. Divided into two halves, with the firstdevoted to trade and the second to monetary questions, the text provides anintuitive introduction to theory and events as well as detailed . The role of governments in regulating international trade and investment is substantial. The horizontal axis refers to the amount of labor while the vertical axis refers to the amount of capital, and the slope of the ray measures the capital-labor ratio (K/L) in the production of the commodity; 2. . 6-month access International Economics -- MyLab Economics without Pearson eText ISBN-13: 9780134636641 | Published 2017 $74.99. (page 123) 2. (Empirics, Part II), Trade Theory with Firm-Level Heterogeneity (Theory, Part I), Trade Theory with Firm-Level Heterogeneity, (cont.) new trade theory. Please also see below. University of Helsinki. faculty: International Economics - . An increase in the real interest rate on U.S. bonds relative to foreign topic 1. what we will cover topic 1: International Economics - . This is equivalent to saying that the K/L ratio (capital-labor ratio) is lower for X than for Y in both nations, but not mean K/L ratio for X is the same in both nations. With TK/TL larger in Nation 2 than in Nation1 in the face of equal demand conditions (and technology), PK/PL will be smaller in Nation 2 , thus Nation 2 is the K-abundant nation in terms of both definitions. According to a bibliography published in 1950, Heckscher had as of the previous year published 1148 books and articles, among which may be mentioned his study of Mercantilism, translated into several languages, and a monumental Economic history of Sweden in several volumes. <>/Metadata 3497 0 R/ViewerPreferences 3498 0 R>> the U.S. to purchase foreign goods and services or foreign investments. According to the definition in terms of factor prices, Nation 2 is capital abundant if the ratio of the rental price of capital to the price of labor time (PK/PL) is lower in Nation 2 than in Nation 1. weaker economies. (Case study 3-2 page 71). main contents exchange rates and, International Economics - . central bank might decide that its holdings of a particular currency become independent. Decreasing Opportunity Costs: ? Lecture 17 slides (PDF - 1.1MB) 18. LECTURE SLIDES. chapter 1:. Under this situation, it does not pay for either nation to continue to expand production of the commodity of its comparative advantage due to the increasing costs. The book is broad enough to satisfy the interests of a range of academic programs, including economics, business, international studies, public policy, and development studies. endobj Points T and H refer to a higher level of satisfaction, since they are on a higher indifference curve . Goods that should have been imported can now be expensive price LECTURE NOTES. MARKET(SUPPLY) Meaning of the Assumptions Assumption 10 of all resources fully employed It means that there are no unemployed resources or factors of production in either nation. Governments also control the supply of currency. And the type and extent of these shifts depend on the type and extent of the changes that take place (details in Chapter 7). Relative and Absolute Factor-Price Equalization To summarize PX/PY will become equal as a result of trade, and this will only occur when w/r has also become equal in the two nations (as long as both nations continue to produce both commodities). International Economics - . Current Account: 12 0 obj There is incomplete specialization in production in both nations; 6. 9 0 obj Chapter 4: Heckscher-Ohlin Model of Comparative Advantage, Chapter 10: Multinational Enterprises and Foreign Direct Investment, Chapter 12: Engaging International Production, Chapter 16: Exchange Rates and Purchasing Power Parity, Chapter 19: International Monetary System, 3351 Fairfax Drive, MSN 3B1 He studied at university in Uppsala and Gothenburg, completing his PhD in Uppsala in 1907. endobj demand increases or shifts right . In 1979 Ohlin was awarded a Nobel prize jointly with James Meade for his work in international trade theory. The student is expected to: (A) explain the concepts of absolute and comparative advantages; (B) apply the concept of comparative advantage to explain why and how countries trade; and Fig. globalization is the process of integration of an economy into the world economy. Although the volume of TRY TO MAINTAIN THEIR CURRENCY VALUE Create stunning presentation online in just 3 steps. faculty: prof. sunitha raju. liabilities). Again, the foreign investments become more attractive. faculty: International Economics - . promote high wages because local industries cannot employment will decrease an outcome. Net Unclassified Items 1,320 the level of competitiveness of the Philippine exports One nations PPF shifts due to the supply or availability of factors and /or technology changes over time. Foreign exchange arbitrage is the buying 5.3 Factor Intensity, Factor Abundance, and the Shape of the Production Frontier Factor Intensity Factor Abundance Factor Abundance and the Shape of the Production Frontier, Factor Intensity Figure 5.1 Factor Intensity FIGURE 5-1 Factor Intensities for Commodities X and Y in Nations 1 and 2, Factor Intensity Explanation of Figure 5.1 Factor Intensity 1. current account adjustments under. 2023 SlideServe | Powered By DigitalOfficePro, - - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -. bonds. (Empirics, Part II). exchanged for each P43.36. globalization is the process of integration of an economy into the world economy. International Economics. 18 slides Meeting 1 - Introduction to international economics (International Economics) Albina Gaisina 6.9k views 26 slides Subject matter and importance of international economics MUHAMMED SALIM AP ANAPPATTATH 1.4k views 18 slides International economic ch01 Judianto Nugroho 4.9k views 14 slides Opportunity cost theory ISBN-10: 1292214953 ISBN-13: 9781292214955 2018 Online Live. The increasing costs mean that the production costs of given-up product decline until they are identical in both nations. session, International Economics - . buy and sell foreign exchange. Its principles regarding multilateral trading this International Economics - . People will supply dollars now to avoid international trade will cause the wages & interest rate to be the Bertil Ohlin (1899-1979) Brief Introduction Bertil Ohlin developed and elaborated the factor endowment theory. (page 124), 5.4 Factor Endowments and the Heckscher-Ohlin Theory The Heckscher-Ohlin Theorem General Equilibrium Framework of the Heckscher-Ohlin Theory Illustration of the Hechscher-Ohlin Theory, Eli Heckscher (1879 - 1952) Brief Introduction He (StockholmNovember 24, 1879 - Stockholm December 23, 1952) was a Swedishpolitical economist and economic historian. Gains form specialization: from T to E, after specialization the production point B of Nation 1 is 130 X and 20Y. assume two goods and two countries. Oia9~GMSsMRI>y{}k= }VUT} V &k|g/&L__3we=s>PWe.T2R>YP{T#'&" ~hl Z@hZ9 jW!EZDJ5. - ASEAN-China Free Trade Area In short, give what you at least have the most and take what you lack the The same technology but different factor prices lead to different relative commodity prices and trade among nations. Net Unclassified Items: the exchange rate. Commodity X is labor intensive, and commodity Y is capital intensive in both nations; 4. The higher real interest rate makes the U.S. bonds more attractive and 7,731 The Marginal Rate of Substitution Marginal Rate of Substitution (MRS) 1. 2. lectures 7 & 8| luca rodrguez| heckscher-ohlin and the role of factor endowments. provide competition with foreign competitors and pay endstream imports decrease, exports will decrease also, and Reasons for Increasing Opportunity Costs and Different Production Frontiers Reasons for Increasing Opportunity Costs 1. of a currency when its price is low and selling high. -- Ch. International economics deals with economic interactions that occur between independent nations. Topics in International Economics. World's Best PowerPoint Templates - CrystalGraphics offers more PowerPoint templates than anyone else in the world, with over 4 million to choose from. session 1: introduction and international trade theory. -.nzx]{*[SStrwO+U[_ci4 jUpMz*$j cA.bFr/Bhpf*CuqxJ|iZAI!h6#wGzZaEz[jd)/yJi"?RTLcE4h5qd&RmBP@9O6`5{ 9'G33eSQT&Q_UUSo*7Ts4Ik>9KE{9kW(9K#zKZvPd5q:: "R|g]3e_;9t^n>W,{ZjWgX :q[b *`-p#},DEO/AlZa"nT4]9m1.`p.O``8 btSU}REb"cHZJ_BT %PDF-1.7 They might also want to have the exchange rate for their currency High wages and a large The summary measure the performance of the If r/w declined, producers would substitute K for L in the production of both commodities to minimize their costs of production. The Factor-Price Equalization Theorem Explanation of H-O-S Theorem 1. 7,948 -1,627 588.5 international economics powerpoint chapter 5, Factor Endowments and the Heckscher-Ohlin Theory, Dominick Salvatore, edition 10, It talks about Factor Intensity, Factor Abundance, and the Shape of the Production Frontier and Factor Endowments and the Heckscher-Ohlin Theory. He was jointly awarded the Nobel Memorial Prize in Economics in 1977 together with the British economist James Meade "for their pathbreaking contribution to the theory of international trade and international capital movements". (Empirics, Part II), Political Economy of Trade Policy and the WTO (Theory, Part I), Political Economy of Trade Policy and the WTO, (cont.) 4. Overall BOP exchange rate changes and current account reactions. 1. January- December xZ_S8LE&s!z\CHLI8pGoy2*$[vWU|y5`0:dsm0yMr=2epA1pAI3&L10Q(+C"EouDn>g84!Q_y[1DOL5>#%W} labor. endobj international, International Economics - . 4.) International economics refers to a study of international forces that influence the domestic conditions of an economy and shape the economic relationship between countries. irs internal to firm (i.e. (see Figure 3.3 page 66) E.G. The increasing opportunity costs in terms of Y that Nations 1 faces are reflected in the longer and longer downward arrows in the figure, and result that the PPF is concave from the origin. X 100 Nation 2s slope of the rays (K/L) in the production of commodity X and commodity Y; The same meaning in Nation 2, K/L in Y=4 while K/L in X= 1. Practicalities. With trade in Nation 2 , the increase production of commodity Y, the increase demand of capital leads to the relative higher price of capital compared with the labor, r/w will rise (w/r will fall) in the end; 7. International trade in goods and services An example: Sony Televisions Standard of Living The International Economy generates Interdependence Economic growth in the United States spurs increased demand for imports Increased import demand by the United States generates economic growth in other countries Subjects in International Economics In other words, it studies the economic interdependence between countries and its effects on economy. endobj during a particular time period. dependent on the export of few primary International Economics, 11th Edition Welcome to the Web site for International Economics, 11th Edition by Dominick Salvatore. MRS is given by the (absolute) slope of the community indifference curve at the point of consumption and declines as the nation moves down the curve. Feenstra is a research associate of the National Bureau of Economic Research, where he directs the International Trade and Investment research program. Typically, countries that employ exchange controls are those with US relative tariffs Illustration of the Hechscher-Ohlin Theory 2. It also means that the labor-capital ratio (L/K) is higher for commodity X than for commodity Y in both nations at the same relative factor prices. faculty: prof. sunitha raju. 11 0 obj 4. He served in Riksdag (Swedish Parliament), was the head of liberal party for almost a 1/4 of a century. be exchanged within the country. Assumption 9 of no transportation costs or other trade obstructions It means that specialization in production proceeds until relative commodity prices are the same in both nations with trade. 7948+1627= 9575 / 1627 = 588.5 In short its a helping hand or fill in the gap kind of trade. Chapter 3 The Standard Theory of International Trade. Organization. Lecturer Matti Sarvimki. Illustration of Trade Based on Differences in Tastes Explanation of Figure 3.6 1. this, International Economics - . Several factors, all relating to decisions of that country A lacks the most. ENVIRONMENT IN WHICH EXCHANGE RATE goods A decrease in the value of the peso from US$1:
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