International trade
Chapitre 2 - The ricardian model
Chapitre 2 - The ricardian model
Fichier Détails
| Cartes-fiches | 11 |
|---|---|
| Langue | Français |
| Catégorie | Economie politique |
| Niveau | Université |
| Crée / Actualisé | 08.01.2018 / 08.01.2018 |
| Lien de web |
https://card2brain.ch/box/20180108_international_trade_JsC2
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What are reasons for trade?
Countries differences => comparative advantage
- Based of productivity (Ricardo)
- Based on endowments (HO)
OR Countries similarities
- Economies of scale
What is the source of comparative advantage for Ricardo?
Difference in production technologies across countries.
What are the main assumptions?
1) Perfect Competition
2) Labord only factor of production
3) Endowments given, confined to country but intersectorally mobile within each country
4) Full employment
5) 2 countries with different technologies (prod functions)
6) Constant returnes to labor
7) Numbers of goods : 2 or infinite
Def of labor requirement per unit output
Def of labor productivity
- ai : coeff : measures the quantity of labour necessary to produce one unit of good i
- the inverse of the labour requirement : 1/ai
What is the full employment condition?
L = ac*Qc + aa*Qa
Def of PPF
max possible production level for a givent techno and factor endowment
Def of the opportunity cost
the slope of the PPF indicates the opportunity cost of the two goods.
Def of world ppf
Juxtapose the country PPFs as the outer lines
What's is the budget constraint condition?
value of production = value of consumption
PaQa*PcQc = PaDa*PcDc
What's imply constant returns to scale?
P = MC = AC
The fisrt equalisation ~ profit maximisation no matter what structure is
The second equalisation ~ perfect competition
What are gains from trade?
1) Rise in wages: ability to buy cheaper imports.
2) Increase in consumtion : countries to consume outside their PPF.
