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Session 2

Session 2. The Basic Theory Using Demand and Supply. Key Questions About International Trade. Why do countries trade? More precisely, what determines which products a country export and which products it import ?. How does trade effect production and consumption in each country ?.

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Session 2

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  1. Session 2 The Basic Theory Using Demand and Supply

  2. Key Questions About International Trade • Why do countries trade? More precisely, what determines which productsa country export and which products it import ? • How does trade effect production and consumption in each country ? • Which country gain from trade ? • Which in each country, who are the gainers and losers from opening trade ?

  3. Trade Usually Results from The Interaction of Competitive Demand and Supply. Demand What are the factors influencing the demand ? Supply What are the factors influencing the supply ? What will happenif the demandand supply are unmatched ?

  4. Consumer Surplus Producer Surplus Demand and Supply for Motorbikes Consumer Surplus Producer Surplus

  5. Consumer Surplus Producer Surplus The Market for Motorbikes:Demand and Supply No-trade Equilibrium

  6. The Effects of Trade on Production, Consumption, and Price, Shown with Demand and Supply Curves World Pricewith Trade World Pricewith Trade Pre-trade Price Pre-tradePrice Sf Sx Imports Exports Dx Df

  7. The Effects of Trade on Production, Consumption, and Price, Shown with Demand and Supply Curve

  8. The Effects of Trade on Well-Being of Producers, Consumers, and the Nation as a Whole Which one better ?

  9. Key Concerned IssueRegarding Net Nation Gain One dollar,one vote The WelfareEffects

  10. Which Country Gain More ? Consumer Surplus Producer Surplus Sx= Represent Exporting Country Sx Dx = Represent Importing Country Dx

  11. Gain More

  12. Importing Country (U.S.) Consumers What if they are rich ? Take Some Advantages Producers What if they are poor ? Take Some Disadvantages Exporting Country (The Rest of the Word) Consumers What if they are poor ? Take Some Disadvantages Producers Take Some Advantages What if they are rich ?

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