课件2ppt课件.ppt
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1、2. Free Trade and Protection,Summary,Theory of Comparative Advantage: Why trade is good. Where comparative advantage comes from: Heckscher-Ohlin Model (factor endowments) Equalization of factor income Welfare Effects of a Tariff : Consumers Lose Govt gains Local producers gain Arguments for protecti
2、on: Optimal tariff Infant industry Employment,Ricardos Theory of Comparative Advantage,Suppose: Country A and Country B. Equally sized. Country A is better at producing both wine and wheat than B.,Ricardos Theory of Comparative Advantage,Suppose: Country A and Country B. Equally sized. Country A is
3、better at producing both wine and wheat than B. Even then, both countries can benefit from trade.,Ricardos Theory of Comparative Advantage,Suppose: Country A and Country B. Equally sized. Country A is better at producing both wine and wheat than B. Even then, both countries can benefit from trade. K
4、ey is relative advantage.,Ricardos Theory of Comparative Advantage,Suppose: Country A and Country B. Equally sized. Country A is better at producing both wine and wheat than B. Even then, both countries can benefit from trade. Key is relative advantage. For example, assume A is relatively better at
5、wheat production than wine.,Before trade: Country A,Before trade A produces a=wine and 120-2a=wheat.,a,120-2a,Before trade B,Before trade B produces b=wine and 15-(b/4)=bread. Total world production is (a + b wine, 135 - 2a - 0.25b wheat).,b,15-(b/4),Now let trade occur,Let B produce 1 more unit of
6、wine (its comparative advantage) and therefore 0.25 less units of wheat.,Now let trade occur,Let B produce 1 more unit of wine (its comparative advantage) and therefore 0.25 less units of wheat. At the same time the A produces one less unit of wine and two more unit of wheat (its comparative advanta
7、ge).,Now let trade occur,Let B produce 1 more unit of wine (its comparative advantage) and therefore 0.25 less units of wheat. At the same time the A produces one less unit of wine and two more unit of wheat (its comparative advantage). Total wine production has not changed, but total wheat output h
8、as increased by 1.75 units!,Now let trade occur,Let B produce 1 more unit of wine (its comparative advantage) and therefore 0.25 less units of wheat. At the same time the A produces one less unit of wine and two more unit of wheat (its comparative advantage). Total wine production has not changed, b
9、ut total wheat output has increased by 1.75 units! Everyone is better off.,Theory of Comparative Advantage,What are the prices? A was prepared to swap 1 unit of wine for 2 wheat so: Price of WheatA = 1/2 X (Price of Wine)A,Theory of Comparative Advantage,What are the prices? A was prepared to swap 1
10、 unit of wine for 2 wheat so: Price of WheatA = 1/2 X (Price of Wine)A B (Supplies Wine) was prepared to swap 1 unit of wine for of wheat so: Price of WheatB = 4 X (Price of Wine)B,Theory of Comparative Advantage,What are the prices? A was prepared to swap 1 unit of wine for 2 wheat so: Price of Whe
11、atA = 1/2 X (Price of Wine)A B (Supplies Wine) was prepared to swap 1 unit of wine for of wheat so: Price of WheatB = 4 X (Price of Wine)B As long as X (World Price of Wine) World Price of Wheat 4 X (World Price of Wine),Some Pictures: Country A Production Possibilities,Wine,Wheat,A Autarky,A,Some P
12、ictures: Country A Production Possibilities,Wine,Wheat,A Autarky,Prices in A,A,Country Bs Production Possibilities,Wine,Wheat,B Autarky,B,Country Bs Production Possibilities,Wine,Wheat,B Autarky,B,Prices in B,Who has higher prices?,Wine,Wheat,A Autarky,B Autarky,A,B,Trade raises the price of wheat i
13、n B and raises the price of wine in A,Wine,Wheat,A,B,Trade raises the price of wheat in B and raise the price of wine in A,Wine,Wheat,A Autarky,A,B,Trade raises the price of wheat in B and raises price of wine in A,Wine,Wheat,A,B,Same Prices = lines are parallel,At the new prices B is better off,Win
14、e,Wheat,B,It produces more wheat,Wine,Wheat,It produces more wheat and consumes more wine,Wine,Wheat,Export Wheat,It produces more wheat and consumes more wine,Wine,Wheat,Export Wheat,Import Wine,2. Sources of Comparative Advantage,1) Preferences: Even if we were completely identical but just liked
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