This Powerpoint was our report for Principles of Economics covering the topics Economic of Trade and Economic of Integration with the ASEAN Economic Integration 2015. This is taken from various books and internet articles. Not for commercial use and for personal reference only. Thank you! "That in all things, God may be Glorified"

2. • Determine the theories that serve as basis for
the economic principle “Trade can make
everyone better-off.”
• Determine the different methods of
restricting trade.
• Determine the different levels of Economic
integration and their examples.
• Provide an overview of the ASEAN Economic
Integration of 2015.

3. Absolute Advantage
Comparative Advantage
Competitive Advantage
Gains from trade based
on Comparative
Advantage
Limits to Specialization
and Trade
Methods of Restricting
Trade

4. LEVELS OF ECONOMIC
INTEGRATION
Free Trade
Customs Union
Common Markets
Economic Union
Political Union
ASEAN Economic
Integration 2015

7. • The ability of a country, individual, company
or region to produce a good or service at a
lower cost per unit than the cost at which any
other entity produces that good or service.
– Ability to produce
– Lower cost per unit
– Than other entity
Party
Widgets
per hour
Number of
Employees
Southern Isles
5
3
Arendelle
10
3

8. Who has the Absolute Advantage in producing telescopes?
Who has the Absolute Advantage in producing boats?

9. You and your friends decided to help with fundraising for a local
charity group by printing t-shirts and making birdhouses.
Gina
Mike
Scenario 1:
• One of your friends, Gina,
can print 5 t-shirts or build 3
birdhouses an hour.
• Your other friend, Mike, can
print 3 t-shirts an hour or
build 2 birdhouses an hour.
Scenario 2
• Suppose Gina wasn't as
agile with the hammer and
could only make 1
birdhouse an hour, but she
took a sewing class and
could print 10 t-shirts an
hour.
• Mike on the other hand
takes woodworking and so
he can build 5 birdhouses
an hour, but he doesn't
know the first thing about
making t-shirts so he can
only print 2 t-shirts an hour.

11. David Ricardo
(1772 –1823)
• British political
economist
• broker and financial
market speculator
• held his
parliamentary seat
for the last four
years of his life

12. Is the ability of a country to produce a good at a lower
opportunity cost than another country.

13. • The law of comparative advantage – trade can
benefit all countries if they specialise in the goods in
which they have a comparative advantage.

14. Example
Tons of Steel
Tons of
Grains
Japan
Either
40
40
America
Either
50
100
If countries are to gain from trade, they should exports those
goods in which they have comparative advantage and import
those goods in which they have a comparative disadvantage.

16. PRICES of the TWO GOODS are likely to REFLECT their
OPPORTUNITY COSTS
Example:
A: 12 sacks of grain for 3 gallons of milk
B: 24 gallons of milk for 6 sacks of grains
A
B

18. Use Resources that are less and less suited to its
production and which were more suited to other
goods.
TERMS of Trade
AVERAGE PRICE OF EXPORTS
AVERAGE PRICE OF IMPORTS
* CHANGES TERMS: CAUSE BY CHANGES IN THE DEMAND AND SUPPLY OF
IMPORTS AND EXPORTS

19. Other reasons for gains from trade
•Decreasing Costs
•Differences in Demand
•Increased competition
•Trade as an ‘engine of growth’
•Non-economic advantages

21. the two types of competitive
advantage:
1. cost leadership advantage
and
2. differentiation advantage
• *FOCUS*

22. cost leadership advantage

23. differentiation advantage

24. focus

25. superior value for
its customers
and superior
profit for itself

26. RESOURCES
DISTINCTIVE
COMPETENCIES
CAPABILITIES
COST-LEADERSHIP
ADVANTAGE
or
DIFFERENTIATION
ADVANTAGE
VALUE
CREATION

27. WHY DO COUNTRIES

29. • is a tax put on goods imported from abroad.
• There are two types of tariffs:
a) Protective tariffs are put in place
specifically to make foreign good more
expensive.
b) Revenue tariffs are put in place to raise
money for the government

30. Increase the domestic
Decreased imports

31. • is a limit on the amount of goods that can be
imported.
• quantity quotas limit the amount of a good
that may be imported, and value quotas limit
the monetary value of a good that may be
imported.
GOODS/
VALUE

32. • Imposition of exchange controls or quotas will
often involve obtaining licenses so that the
government can better enforce its restrictions.

33. • Limits on the amount or foreign exchange made
available to importers (financial quotas)
or to citizens travelling abroad or for investing.

34. • stops exports or imports of a product or group
of products to or from another country.

35. • is a tax imposed on commodities leaving a
customs area.
• It is used to increase the price of exports when
the country has monopoly power in supply.

36. • payments made by the government to domestic
firms, both encourage exports and make
domestic products cheaper to foreign buyers.

37. • Regulations may be designed to exclude imports.
• Countries are sometimes accused of using their
various administrative rules as a way to
introduce barriers to imports.

38. • This where government favor domestic
producers when purchasing equipment.

42.  process in which two or more states in a
broadly defined geographic area reduce a
range of trade barriers to advance or protect a
set of economic goals.

44.  Tariffs (a tax imposed on imported goods)
between member countries are abolished or
significantly reduced. Each member country
keeps its own tariffs in regard to third countries.

46.  Sets common external tariffs among
member countries, implying that the
same tariffs are applied to third
countries.

48.  Factors of production, such a labor and
capital, are free to move within member
countries, expanding scale economies
and comparative advantages.

50.  Monetary and fiscal policies between
member countries are harmonized,
which implies a level of political
integration. A further step concerns a
monetary union where a common
currency is used.

52.  Represents the potentially most
advanced form of integration with a
common government and were the
sovereignty of member country is
significantly reduced. Only found within
nation states, such as federations where
there is a central government and
regions having a level of autonomy.

55. What is the ASEAN?
The Association of Southeast
Asian Nations is a political and
economic organization of ten
countries located in Southeast Asia,
which was formed on 8 August 1967
by Indonesia, Malaysia, the Philippines, Singapore and Thailand.
Since then, membership has expanded to include Brunei, Burma
(Myanmar), Cambodia, Laos, and Vietnam. Its aims include
accelerating economic growth, social progress, and cultural
development among its members, protection of regional peace and
stability, and opportunities for member countries to discuss differences
peacefully.

56. ASEAN has emphasized regional cooperation in the “three pillars”

57. The ASEAN Economic Community (AEC) shall be the goal of
regional economic integration by 2015
The AEC will be fully established by 2015, and is expected
to improve competitiveness by transforming the economic
group into a single market and production base, based on
the following five objectives:
1.
2.
3.
4.
5.
Free Flow of Goods
Free Flow of Trade
Free Flow of Investments
Free Flow of Capital
Free Flow of Skilled Labor

58. The AEC is the realization of the region’s end
goal of economic integration.
It envisions ASEAN as a single market and
production base, a highly competitive region,
with equitable economic development, and
fully integrated into the global economy.