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  • IE-Chapter 2

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    Nam Bùi Hoàng
    8 views9 pages
    The document contains information about labor productivity and trade opportunities between multiple countries. It provides labor hours and output for different products in Thailand, Laos, USA, Korea, India, and other countries. It then analyzes opportunities for specialization and trade based on each country's comparative advantage. Through trade, countries can specialize in what they are relatively best at producing to gain benefits from specialization and exchange.

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    IE-Chapter 2 (2)

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    The document contains information about labor productivity and trade opportunities between multiple countries. It provides labor hours and output for different products in Thailand, Laos, USA, Korea, India, and other countries. It then analyzes opportunities for specialization and trade based on each country's comparative advantage. Through trade, countries can specialize in what they are relatively best at producing to gain benefits from specialization and exchange.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    8 views9 pages

    IE-Chapter 2

    Uploaded by

    Nam Bùi Hoàng
    The document contains information about labor productivity and trade opportunities between multiple countries. It provides labor hours and output for different products in Thailand, Laos, USA, Korea, India, and other countries. It then analyzes opportunities for specialization and trade based on each country's comparative advantage. Through trade, countries can specialize in what they are relatively best at producing to gain benefits from specialization and exchange.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 9

    Labor cost (Hours of labor/ product)

    China (800h / 2) Japan (800h/ 2)


    Silk 1 5
    Vacuum Cleaner 4 2

    Hours of labor/ product


    Thailand (600h / 2) Laos (600h / 2)
    Durian (300h) 3 5
    Beer (300h) 4 1,5
    Quantity in Autarky (Labor hour/ Product)
    Thailand(600h/2) Laos (600h/2) World
    Durian (300h) 100 60 160

    Beer (300h) 75 200 275

    • Autarky model
    Dr = 3/4 Beer Dr = 10/3 Beer Specializing
    TL ;Laos Thailand Laos World
    Beer = 4/3 Dr Beer = 3/10 Dr
    Durian 200 0 200
    • Exchange
    è Thailand Exp Dr Beer 0 400 400
    Dr 3 10
    Beer 4 3 è Laos Exp Beer
    • Trading
    Dr > 3/4 Beer Dr <10/3 Beer
    TL ; Laos
    Beer < 4/3 Dr Beer > 3/10 Dr

    èDr = (3/4 – 10/3) Beer Or èBeer = (3/10 - 4/3) Dr

    èDr = 2 Beer è 75Dr = 150Beer Quantity after trading


    Thailand Laos TG
    • Equalizing benefit
    èDr = 49/24 Beer Durian 200-75 = 125 0 + 75 = 75 200
    èBeer = 49/60 Dr
    Beer 0 + 150 = 150 400 - 150 = 250 400
    Productivity (Products/ Hours of labor)
    USA (1200h SX/ 2) Korea (1200h SX/ 2)
    Kimchi (600h) 2Kc = 1h 4Kc
    Apple (600h) 5Ap 3Ap

    Productivity (Products/ Hours of labor)


    India (1000h SX/ 2) Holland (900h SX/ 2)
    Milk 2 5
    Medicine 6 3
    Quantity in Autarky
    USA (1200h) Korea (1200h) World
    Kimchi (600h) 1200 2400 3600 KC

    Apple (600h) 3000 1800 4800 Apple

    • Autarky model
    KC = 5/2 Apple KC = 3/4 Apple Specializing
    USA ;Kr USA Korea World
    Apple = 2/5 KC Apple = 4/3 KC
    KC 0 4800 4800 KC
    • Exchange
    Apple 6000 0 6000
    KC 2 4 è Kr Exp KC Apple
    Apple 5 3 è USA Exp Apple
    • Trading
    KC < 5/2 Apple KC > 3/4 Apple
    USA ; Kr
    Apple > 2/5 KC Apple < 4/3 KC

    èKC = (3/4 – 5/2) Apple Or èApple = (2/5 - 4/3) KC


    èKC = 2 Appleè1500 KC = 3000 Apple
    • Equalizing benefit
    After trading
    èKC = 13/8 Apple USA Korea TG
    èApple = 26/30 KC
    KC/Apple KC 0+1500 4800 - 1500 4800
    3/4 13/8 5/2 = 3300

    KC < APPLE KC > APPLE Apple 6000 – 3000 0 + 3000 6000


    KOR < USA KOR > USA =3000
    Productivity/ Hours of labor
    AUS (1000h SX/ 2) Italy (1200h SX/ 2)
    Grape 3 4
    Strawberry 5 3

    Hours of labor/ product


    India (800h SX/ 2) Holland (900h SX/ 2)
    Software 2 5
    Tulip 6 3
    Absolute Advantage è Wrong

    What if your country has nothing to trade

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