第三章 85 Classic trade theory.ppt

* A case of opportunity cost The OC of cloth: U.K.: 0.5/1=1/2= aLC /aLW = PC / PW U.S.: 1/0.8=1.25/1= a*LC / a*LW = P*C / P*W Because aLC /aLW a*LC / a*LW , so U.K. has a comparative advantage in cloth, and will export it to U.S. in exchange for wheat. Cloth (aLC) Wheat (aLW) U.K. 1.0 2.0 U.S. 1.25 1.0 * (50) L/aLW (100)L/aLC U.K.’s Production Possibility Frontier Absolute value of slope equals opportunity cost of cloth in terms of wheat F P wheat, QW cloth, QC, * F* P* (100)L*/a*LW (80)L*/a*LC Wheat, Q*W Cloth, Q*C +1 U.S.’s Production Possibility Frontier * Comparative advantage theory David Ricardo and his idea Measurements of comparative advantage Gains from trade under constant opportunity cost Misconceptions about comparative advantage Comparative advantage with many goods Empirical evidence on the Ricardian model The limitations of the Ricardian model Application of the comparative advantage * Trade Expands Consumption Possibilities T F P T* P* F* (a) U.K. (b) U.S. wheat, QW cloth, QC wheat, Q*W cloth, Q*C A 25 50 30 70 B 65 28 A* 70 30 B* If countries specialize according to their comparative advantage, they all gain from this specialization and trade. * 2 RD RD 1 Q (1/2)aLC/aLW (1.25)a*LC/a*LW RS World Relative Supply and Demand Relative price of cloth, PC/PW Relative quantity of cloth, QC + Q*C QW + Q*W L/aLC L*/a*LW The hourly wage of cloth= PC*(1/aLC)=PC/aLC The hourly wage of wheat= PW*(1/aLW)=PW/aLW * Comparative advantage theory David Ricardo and his idea Measurements of comparative advantage Gains from trade under constant opportunity cost Misconceptions about comparative advantage Comparative advantage with many goods Empirical evidence on the Ricardian model The limitations of the Ricardian model Application of the comparative advantage * Misconceptions about comparative advantage Productivity and Competitiveness Myth 1神话、没有事实根据的观点 : Free trade is beneficial only if a country is strong enough to withstan