International Economics       Lecture 3      Trade-offs,Comparative Advantage,and the Market System
Yabut
IntentResult
Fell    Pushed    JumpedResult the same
SlopePercentage Change   Relationships Cause and Effect      Areas
Notation%	 	 Percent        Change%       Percentage Change
%   Percentage Change    New - Old        Old
%     Percentage Change      New - Old          Old7-5 5
%       Percentage Change        New - Old            Old7-5 = 5
%    Percentage Change     New - Old         Old7-5 = 2 5    5
%    Percentage Change     New - Old         Old7-5 = 2 = 5    5
%      Percentage Change       New - Old           Old7 - 5 = 2 = .4  5     5
%      Percentage Change       New - Old           Old7 - 5 = 2 = .4 =  5     5
%      Percentage Change       New - Old           Old7 - 5 = 2 = .4 = 40%  5     5
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old9-6 6
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old9-6 = 6
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old9-6 = 3 6    6
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old9-6 = 3 = 6    6
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old9 - 6 = 3 = .5  6     6
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old9 - 6 = 3 = .5 =  6     6
Last year the price was $6.This year the price is $9.What is the percentage change?New - Old  Old9 - 6 = 3 = .5 = 50%  6  ...
Y    X
Price  Y        X Quantity
$Price  Y        X Quantity   Q
$    Q
$    Q
$    Q
$    Q
$    Q
$    Q
Opportunity Cost
Opportunity CostThe highest valued   alternative
Absolute Advantage    Produce more with    the same resourcesComparative Advantage       Produce at a  lower opportunity c...
David Ricardo    (1772 - 1823)     Principles of   Political Economy     and TaxationComparative Advantage
The basis for trade iscomparative advantage,          not  absolute advantage.
No Trade        2 Hooks and 2 Fish    10 Hours - 5 Hours per Fish                           Total         Adam      Eve   ...
With Trade        2 Hooks and 2 Fish     8 Hours - 4 Hours Per Fish                            Total        Adam       Eve...
Saudi   Idaho
Saudi Arabia                   Idaho  Dates     Potatoes       Dates      Potatoes    24         0             6          ...
Dates                            Should Idaho and Saudi Trade?    27    24    21    18    15    12        9        6      ...
Dates                            Should Idaho and Saudi Trade?    27                             Dates     Potatoes    24 ...
Dates                                Should Idaho and Saudi Trade?    27                                 Dates     Potatoe...
Dates                                Should Idaho and Saudi Trade?    27                                 Dates     Potatoe...
Dates                                Should Idaho and Saudi Trade?    27                                 Dates     Potatoe...
Dates                                Should Idaho and Saudi Trade?    27                                 Dates     Potatoe...
Dates                                Should Idaho and Saudi Trade?    27                                 Dates     Potatoe...
Dates                                Should Idaho and Saudi Trade?    27                                 Dates     Potatoe...
Dates                                Should Idaho and Saudi Trade?    27                                 Dates     Potatoe...
Internal             Dates      Potatoes  Price Idaho     5 Potatoes   1/5 Date Saudi     1/4 Potato   4 Dates
Internal             Dates      Potatoes  Price Idaho     5 Potatoes   1/5 Date Saudi     1/4 Potato   4 Dates
Internal             Dates      Potatoes  Price Idaho     5 Potatoes   1/5 Date Saudi     1/4 Potato   4 Dates
No Trade   Dates   Potatoes Idaho       3       15 Saudi      12        3  Total     15       18
Specialize   Dates   Potatoes  Idaho        0       30  Saudi       24        0  Total       24       30
Analysis     Dates   PotatoesNo Trade              15       18 TotalsSpecialize              24       30  Totals  Gain    ...
Trade          Dates         Potatoes  Idaho      3 to 12 = +9        15California       12         3 to 15 = +12  Total  ...
Dates                            Should Idaho and Saudi Trade?    27    24    21    18    15    12        9        6      ...
Dates                                Should Idaho and Saudi Trade?    27    24    21    18    15              Saudi       ...
Dates                                Should Idaho and Saudi Trade?    27    24    21    18    15              Saudi       ...
Dates                                Should Idaho and Saudi Trade?    27    24    21    18    15              Saudi       ...
Dates                                Should Idaho and Saudi Trade?    27    24    21    18    15              Saudi       ...
Dates                                Should Idaho and Saudi Trade?    27    24    21    18    15              Saudi       ...
Dates                                Should Idaho and Saudi Trade?    27    24    21    18    15              Saudi       ...
Dates                                Should Idaho and Saudi Trade?    27                                                  ...
Dates                                Should Idaho and Saudi Trade?    27                                                  ...
MarketsWhere Buyers and Sellers Trade
The Market System         TrustPrivate Property Rights      Rule of Law
Why are some  rich andothers poor?
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
310 lecture 3
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  • 310 lecture 3

    1. 1. International Economics Lecture 3 Trade-offs,Comparative Advantage,and the Market System
    2. 2. Yabut
    3. 3. IntentResult
    4. 4. Fell Pushed JumpedResult the same
    5. 5. SlopePercentage Change Relationships Cause and Effect Areas
    6. 6. Notation% Percent Change% Percentage Change
    7. 7. % Percentage Change New - Old Old
    8. 8. % Percentage Change New - Old Old7-5 5
    9. 9. % Percentage Change New - Old Old7-5 = 5
    10. 10. % Percentage Change New - Old Old7-5 = 2 5 5
    11. 11. % Percentage Change New - Old Old7-5 = 2 = 5 5
    12. 12. % Percentage Change New - Old Old7 - 5 = 2 = .4 5 5
    13. 13. % Percentage Change New - Old Old7 - 5 = 2 = .4 = 5 5
    14. 14. % Percentage Change New - Old Old7 - 5 = 2 = .4 = 40% 5 5
    15. 15. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old
    16. 16. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old9-6 6
    17. 17. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old9-6 = 6
    18. 18. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old9-6 = 3 6 6
    19. 19. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old9-6 = 3 = 6 6
    20. 20. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old9 - 6 = 3 = .5 6 6
    21. 21. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old9 - 6 = 3 = .5 = 6 6
    22. 22. Last year the price was $6.This year the price is $9.What is the percentage change?New - Old Old9 - 6 = 3 = .5 = 50% 6 6
    23. 23. Y X
    24. 24. Price Y X Quantity
    25. 25. $Price Y X Quantity Q
    26. 26. $ Q
    27. 27. $ Q
    28. 28. $ Q
    29. 29. $ Q
    30. 30. $ Q
    31. 31. $ Q
    32. 32. Opportunity Cost
    33. 33. Opportunity CostThe highest valued alternative
    34. 34. Absolute Advantage Produce more with the same resourcesComparative Advantage Produce at a lower opportunity cost
    35. 35. David Ricardo (1772 - 1823) Principles of Political Economy and TaxationComparative Advantage
    36. 36. The basis for trade iscomparative advantage, not absolute advantage.
    37. 37. No Trade 2 Hooks and 2 Fish 10 Hours - 5 Hours per Fish Total Adam Eve HoursMake a 3 2 5HookCatch 4 1 5a Fish Total 7 3 10Hours
    38. 38. With Trade 2 Hooks and 2 Fish 8 Hours - 4 Hours Per Fish Total Adam Eve HoursMake a 2 hooks 6Hook 6 hoursCatch 2 fish 2a Fish 2 hours Total 6 2 8Hours
    39. 39. Saudi Idaho
    40. 40. Saudi Arabia Idaho Dates Potatoes Dates Potatoes 24 0 6 0 20 1 5 5 16 2 4 10 12 3 3 15 8 4 2 20 4 5 1 25 0 6 0 30 Ratios Ratios 24 to 6 6 to 304 Dates for 1 Potato 1/5 Dates for 1 Potato 6 to 24 30 to 61/4 Potato for 1 Date 5 Potatoes for 1 Date
    41. 41. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 12 9 6 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    42. 42. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 12 9 6 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    43. 43. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 Saudi PPF 12 9 6 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    44. 44. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 Saudi PPF 12 Dates Potatoes 6 0 5 5 9 4 10 3 15 6 2 20 1 25 3 0 30 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    45. 45. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 Saudi PPF 12 Dates Potatoes 6 0 5 5 9 4 10 3 15 6 2 20 Idaho PPF 1 25 3 0 30 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    46. 46. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 Saudi PPF 12 Dates Potatoes 6 0 5 5 9 4 10 3 15 6 2 20 Idaho PPF 1 25 3 0 30 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    47. 47. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 Saudi PPF 12 Dates Potatoes 6 0 5 5 9 4 10 3 15 6 2 20 Idaho PPF 1 25 3 0 30 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    48. 48. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 Saudi PPF 12 Dates Potatoes 6 0 5 5 9 4 10 3 15 6 2 20 Idaho PPF 1 25 3 0 30 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    49. 49. Dates Should Idaho and Saudi Trade? 27 Dates Potatoes 24 24 0 20 1 21 16 2 12 3 8 4 18 4 5 0 6 15 Saudi PPF 12 Dates Potatoes 6 0 5 5 9 4 10 3 15 6 2 20 Idaho PPF 1 25 3 0 30 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    50. 50. Internal Dates Potatoes Price Idaho 5 Potatoes 1/5 Date Saudi 1/4 Potato 4 Dates
    51. 51. Internal Dates Potatoes Price Idaho 5 Potatoes 1/5 Date Saudi 1/4 Potato 4 Dates
    52. 52. Internal Dates Potatoes Price Idaho 5 Potatoes 1/5 Date Saudi 1/4 Potato 4 Dates
    53. 53. No Trade Dates Potatoes Idaho 3 15 Saudi 12 3 Total 15 18
    54. 54. Specialize Dates Potatoes Idaho 0 30 Saudi 24 0 Total 24 30
    55. 55. Analysis Dates PotatoesNo Trade 15 18 TotalsSpecialize 24 30 Totals Gain +9 +12
    56. 56. Trade Dates Potatoes Idaho 3 to 12 = +9 15California 12 3 to 15 = +12 Total 24 30
    57. 57. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 12 9 6 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    58. 58. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 Saudi PPF 12 9 6 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    59. 59. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 Saudi PPF 12 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    60. 60. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 Saudi PPF 12 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    61. 61. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 Saudi PPF 12 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    62. 62. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 Saudi Trade PPF PPF 12 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    63. 63. Dates Should Idaho and Saudi Trade? 27 24 21 18 15 Saudi Trade PPF PPF 12 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    64. 64. Dates Should Idaho and Saudi Trade? 27 Idaho 24 gains 9 Dates 21 18 15 Saudi Trade PPF PPF 12 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    65. 65. Dates Should Idaho and Saudi Trade? 27 Idaho 24 gains 9 Dates 21 18 15 Saudi Trade California PPF PPF gains 12 12 potatoes 9 6 Idaho PPF 3 0 0 3 6 9 12 15 18 21 24 27 30 Potatoes
    66. 66. MarketsWhere Buyers and Sellers Trade
    67. 67. The Market System TrustPrivate Property Rights Rule of Law
    68. 68. Why are some rich andothers poor?
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