Professional Documents
Culture Documents
Econ Report
Econ Report
Econ Report
Introduction to
International Economics
International Trade
Benefits of Trade
Gains of Trade
David Ricardo's
Comparative Advantage
›Ricardo’s “On the Principles of Political Economy
and Taxation” in 1817.
›Economic theory about the work gains from trade for
individuals, firms or nations that arise from differences
in their factor endowments or technological progress.
›Agents have comparative advantage in a economic
model.
›Mercantilism
Determinants of
Comparative Advantage
› Availability or lack thereof of natural resources
› Factor Endowments
› Heckler-Ohlin Theory – a nation will export the
commodity whose production requires the intensive
use of the nation’s relatively abundant and cheap
factor and import the commodity.
Trade Balance
›Trade Surplus / Favorable Balance of Trade - (E > I)
›Trade Deficit / Unfavorable Balance of Trade - (I > E)
Tariff and Nontariff
Barriers to Trade
› TARIFF is a tax levied on import of goods. Its main purpose
is to reduce imports to protect domestic producers from
foreign competition.
›Import Quota is a nontariff barrier which limits the quantity
of good that is produced by foreign entity that can be
imported.
›Voluntary Export Restraints (VER) refer the case where an
importing country induces another country to voluntarily
reduced its exports of a particular commodity under threat of
higher all-around trade restrictions when these compromise
an entire domestic industry.
›Dumping is the export of a commodity at below cost or at
least the sale of commodity at a lower price abroad than
domestically
Exchange Rate
• Exchange Rate expresses the currency of the nations in
respect to foreign ones.
•It is important price in the economy because it determines the
international balance of payment.