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International Economics

Lecture 1 | 15 November 2012

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• World trade overview • Philippine trade overview • Digression: Review of Microeconomics
 consumption  production  competitive equilibrium

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World trade overview • Source: WTO via World Development Indicators.00 6.00 8.21 1961 1971 1981 1991 2001 2011 3 .00 2. 2012 World Merchandise Exports.00 10.00 14.00 18.00 0.00 16.00 12.00 18.00 4. 1961-2011 (In Current Trillion US $) 20.

World trade overview • Growth in volume of world merchandise trade and GDP. 2000-11 (annual percentage change) • Source: 2012 International Trade Statistics .

World trade overview • Source: 2012 International Trade Statistics 5 .

World trade overview • Source: 2012 International Trade Statistics 6 .

World trade overview • Source: 2012 International Trade Statistics 7 .

World trade overview • Source: 2012 International Trade Statistics 8 .

World trade overview • Source: 2012 International Trade Statistics 9 .

1961-2011 120 100 80 60 40 20 0 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 10 .Philippine trade overview • Source: World Development Indicators Philippine Trade as a Percentage of GDP.

1961-2011 70 60 50 40 30 20 10 0 1961 1971 imports 1981 exports 1991 Linear (imports) Linear (exports) 2001 2011 11 .Philippine trade overview • Source: World Development Indicators Philippine Imports and Exports as a Percentage of GDP.

Philippine trade overview • Source: NSO 12 .

Philippine trade overview • Source: NSO 13 .

Philippine trade overview • Source: NSO 14 .

Philippine trade overview • Source: World Development Indicators 100 90 80 70 60 50 40 30 20 10 0 Agricultural and Manufacture Exports. 1961-2011 (In % of Merchandise Exports) 1961 1971 1981 agricultural 1991 manufactures 2001 2011 15 .

16 . Budget constraints are constraints that consumers face as a result of limited incomes.Review: Consumer Theory Def.

say food and clothing. • Let X be the amount of food you purchase and Y be the amount of clothing. 17 . • Denote the prices of the two goods Px and Py.Review: Consumer Theory • Consider a situation in which you have a fixed amount of income I that can be spent on two goods.

18 .Review: Consumer Theory • The combinations of food and clothing that you can buy will all lie on the budget line: PX X + PY Y = I • Def. The budget line indicates all combinations of goods for which the total amount of money spent is equal to income.

Review: Consumer Theory PX X + PY Y = I Y I PY  I =  Y  PY   PX −   PY  X  I P 19 X .

Review: Consumer Theory  I   PX  =  −  X Y  PY   PY  Slope: dY = −  PX    dX  PY  Economic interpretation: The slope gives you the price of “X relative to Y” or “measured in units of Y” Y I PY In English: The slope tells you how much Y you have to give up to get 1 more of X. I P 20 X .

Review: Consumer Theory  I =  Y  PY  X  I I Intercepts: . I P 21 X . PX PY Economic interpretation:   PX −   PY Y I PY The intercept tells you how much of each good could you buy if you bought nothing of the other.