Chapter3 Interdependence and the Gains from Trade.ppt

Comparative Advantage and Opportunity Costs The original idea of comparative advantage was based on the labor theory of value: We can use the opportunity cost(机会成本) theory to explain comparative advantage 3-* Comparative Advantage and Opportunity Cost (cont.) 如果一国生产某种商品的机会成本较低，则在这种商品上具有比较优势 A country with a comparative advantage in producing a good uses its resources most efficiently when it produces that good compared to producing other goods. A measure of comparative advantage Opportunity Cost (机会成本) Relative Labor Productivity (相对劳动生产率) Relative Production Cost (相对生产成本) 3-* * Suppose that in the U.S. 10 million roses can be produced with the same resources as 100,000 computers. Suppose also that in South America 10 million roses can be produced with the same resources as 30,000 computers. An example * If each country specializes in the production of the goods with lower opportunity costs, trade can be beneficial for both countries. The benefits from trade can be seen by considering the changes in production of roses and computers in both countries. * Hypothetical Changes in Production * What determines comparative advantage?  3-* Trade in the Ricardian Model Suppose the domestic country is more efficient in wine and cheese production. It has an absolute advantage in all production: aLC a*LC and aLW a*LW The domestic country has a comparative advantage in cheese production： aLC /aLW a*LC /a*LW 3-* Trade in the Ricardian Model (cont.) The domestic country will export cheese, and the foreign country will export wine. Eventually, the domestic relative price of cheese will be equal to the foreign relative price of cheese. 3-* Determining the Relative Price After Trade 国际贸易的结果是， 一种贸易产品 （奶酪）对另一种 产品（葡萄酒） 的相对价格位于贸 易前两国的相对价 格之间。 3-* Gains From Trade Domestic workers earn a higher income from cheese production Foreign workers earn a higher income from wine production With trade, consumption in each country is expanded Without trade, consumption is re