For College students

1. B.COM SEM-V
UNIT-I
International Economics

2. MULTILATERAL TRADE
&
MARKET IMPERFECTION

3. COMPARATIVE COST ADVANTAGE
THEORY : ASSUMPTIONS
• There are only two countries and two
commodities
• Only labour is factor of production. Quantity of
labour used gives cost of production
• There is no cost of transportation between the
countries
• The law of constant returns to scale operates in
production.
• The units of labour are homogeneous

4. More than two countries
Country Cloth Coffee Exchange rate
India 10 30 1 Cloth : 3 Coffee
Sri Lanka 10 20 1 Cloth : 2 Coffee
Nepal 10 10 1 Cloth : 1 Coffee

6. More than two commodities
Country Goods (Units)
V W X Y Z
India 30 25 20 15 10
Sri Lanka 10 10 10 10 10
Difference 20 15 10 5 0

8. Country Per unit labour cost of
cloth
Per unit labour cost of
coffee
China 12 8
India 4 4
Country Per unit money cost of
cloth (In Rs)
Per unit money cost of
coffee (In Rs)
China 12Rs 8Rs
India 10Rs 10Rs
Wage rate (Per day)
China :- 1 rs
India :- 2.5 rs
Money cost of production

9. Transport costs
Country Goods Unit Price
India Cloth 100 rs
Sri lanka Cloth 150 rs

10. Increasing cost conditions

11. Labour cost