Labor cost (Hours of labor/ product)

Na 1 (800h / 2) Na 2 (900h / 2)
Bike (400/450) 4h = 1b 3
VC (400/450) 5 1,5

Productivity (Products/ Hour)

Na 1 (1200h / 2) Na 2 (1200h / 2)
Software (600h) 2So = 1h 6s = 1h
Pills (600h) 3Pl = 1h 5p=1h
 PRODUCTIVITY
Na1 (1200h/2) Na2 (1200h/2) World
Software (600h) (2)=1200 (6)=3600 4800 Software

Medicine (600h) (3)=1800 (5)=3000 4800 Medecine

• Autarky Model
Soft = 3/2Med Soft = 5/6 Med Trading products
1 ;2 Na1 Na2 World
Med = 2/3 Soft Med = 6/5 Soft
Software -------- 3600
• Exchange
Soft è Na1 Exp Med Med 1800 -------
2 6
Med 3 5 è Na2 Exp Soft
• Trading
Soft < 3/2 Med Soft > 5/6 Med
1 ;2
Med > 2/3 Soft Med < 6/5 Soft
èSoftware = (5/6 – 3/2) Med or è Med = (2/3 - 6/5) Software

è3Software = 4Med è Software=4/3Med è 1750Software = 2100Med

- Na2 needs 1750Software è need 292h è Med has 308h è 1540Med
- Na1 needs 2100Me è need 700h è Soft has 0h è 0So+ lack 100h= 0 + 300Med
- Equalizing benefit
Software = 7/6 Med Quantity after trading
5/6 3/2 Na1 Na2 W
Software<Med Software>Med Soft 0(1) + 1750 (2) 3600
Na2 < Na1 Na2 > Na1
Med 1800 - 300 1540(2) + 2100(1)
 CURRENCY EFFECT 1.3.3
1. Movements across many countries: re-export, transparent;
2. The impact of the government on price changes;
3. Other types of cost increases;
4. The cooperation of Nations 1 or global companies; multinational 1;
5. External effects; market economy…

6.EXCHANGE RATE
 Labor cost (Hours of labor/product)
USA (10USD/h) China (40CNY/h)
Computer 40h 50h
Vacuum 50h 70h

Computer: 40 < 50
Vacuum: 50 < 70

40/50 > 50/70: USA has advantage in Vacuum

China has advantage in Computer
 1 USD = 8 CNY
USA (1h=10USD) China(1h=40CNY)
Dom Price Export price Dom price Export price
(USD) (CNY) (CNY) (USD)
Computer 400$ 3.200CNY 2.000CNY 250$
Vacuum 500$ 4.000CNY 2.800CNY 350$
Computer and Vacuum price in China have advantage when dumping.
è The competitive strength of China in USA
è Currency effect

Comparative Advantage: Low Cost US Economy, Low Chinese

Coverage è China's Competitive Advantage Due to Lower US CPI
 COST Price
USA (1h=10 USD) China (1h=40CNY)
COM (40h)=400USD (50h)=2.000CNY COM: 40 50
VC: 50 70
VC (50h)=500USD (70h)=2.800CNY
è CNN Exp COM
è USA Exp VC
COM: 400xUSD > 2.000 CNY
è VC: 500xUSD < 2.800 CNY

è COM: 1USD > 2.000/400 CNY

VC: 1USD < 2.800/500 CNY

è Exchange rate range : 5CNY < 1USD < 5,6 CNY (OR) 5/28USD<CNY<1/5USD
 Practices
1. Determine the productive scale, demand and substitution rate in the Autarky
economy.

2. Determine each Na1tion’s advantage & the range for mutually beneficial trade.
3. Determine the interNa1tioNa1l trade ratio.
4. Determining the benefits of supply and demand, then show the trading rate.
5. Determine the equilibrium in trade between the two Na1tions
6. Assume Na11 pays 1h = 3 USD. Na1 2 pays 1h = 2 €. What is the suitable
exchange rate to make mutually beneficial trading?
 Na1 pays 1h = 3$. Na2 pays 1h = 2€

Products/ Hour
Na1 (1200h SX/ 2) Na2 (1200h SX/ 2)
Kimchi 4 8
Apple 5 6

Hours of labor/ product

Na 1 (800h SX/ 2) Na 2 (600h SX/ 2)
Car 4 6
Beer 4,5 5
 Productivity Price
1 (1h=3 USD) 2(1h=2€)
KC (4)è1/4h=0,75$ (8)è1/8h=1/4€ KC: 4 8
APL: 5 6
APL (5)è1/5h=3/5$ (6)è1/6h=1/3€
è Na2 Exp KC
è Na1 Exp APL
KC: 0,75xUSD > 1/4 €
è APL: 3/5xUSD < 1/3 €

è KC: 1USD > 0,33 €

APL: 1USD < 5/9 €

è Exchange rate: 0,33 € < 1USD < 5/9 € or ….

 LIMITATIONS OF THESIS 1.3.4
1. The doctrine has not shown the competitive model in a monopoly and imperfect
competition
2. The impact of the government on trade
3. Comparative doctrine in static economy
4. The doctrine simply revolves around TG with 2 countries

What happens if a country has an edge over all?

What happens if one of the two countries will have nothing to gain
comparative advantage?
How does the impact of exteranl factors affect?
PRACTICE
 Labor cost (hour/ 1 product)
Na1 (120.000h) Na2 (240.000h) World
X (60.000h/120.000h) (20) (60) ____X

Y (60.000h/120.000h) (30) (40) ____Y

3/ 3.000X = 3.250Y èWhat is the rate?
1/ Autarky model
X = ---- Y X = ---- Y 4/ Equalizing benefit?
1 ;2
Y = ---- X Y = ---- X 5/ Which range Na1>Na2 and Na2<Na1
2/ Exchange 6/ Exchange rate
X ? ? è ----- Exp X 1 (1h=2,5£) 2(1h=3$)
Y ? ? è ----- Exp Y X (20) (60)

Y (30) (40)