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Master title
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Spesific
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Master Distribution
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Ahmad Zaenal Wafik S.E.,M.Ec.Dev.
Universitas Mataram
2022

Jl. Majapahit No. 62 Mataram | unram.ac.id

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• Recap : Ricardian model assumes only one factor (labour), and hence suggests that
when country becomes better off through trade, all the individuals within that

•
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country gain as well.
However, in reality, this is too simple, Even trade in the aggregate makes society
better off, there can be individuals within that country that can actually be worse
off (in short term)
• In order words, trade can alter the distribution of income, creating both winners
and losers.
• Therefore, we now introduce a simple model with additional factor of production, and use this in
part to show how intrenational trade can make individuals both betters and worse off
• Our initial model in sometimes called “Spesific Factor” Model

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Model
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(Without
Master Trade)
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• One country (i.e. No. trade initially)

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• Two goods (Cloth and food)
• Three factors of production:
• Labour (used in both sectors) – Lc and Lf
• Capital (used only for cloth) - K
• Land (used only for food) – T
• Summarise the producion of each good using a production function:
Qc = Qc(K, Lc)
Qf= Qf(T, Lc)
{And therefore Lc + Lf = L}

Jl. Majapahit No. 62 Mataram | unram.ac.id

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• An understanding of consequenses of this model requires us to recap the Law of
Diminishing Marginal Return style
• Specifically, because only labour can move between sectors, the Marginal Product of Labour (MP1)
CLOTH
Qc MPLc
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Lc (Labour) Lc (Labour)
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Master title
title style
• An understanding of consequenses of this model requires us to recap the Law of
Diminishing Marginal Return style
• Specifically, because only labour can move between sectors, the Marginal Product of Labour (MP1)
CLOTH
Qc MPLc
Click toQc edit
=Qc(K,Lc) Master title style

Slope of the production

function =MPLc

Lc (Labour) Lc (Labour)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Click
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edit Master
Master title
title style
• An understanding of consequenses of this model requires us to recap the Law of
Diminishing Marginal Return style
• Specifically, because only labour can move between sectors, the Marginal Product of Labour (MP1)
CLOTH
Qc MPLc
Click toQc edit
=Qc(K,Lc) Master title style

Slope of the production

function =MPLc
MPLc

Lc (Labour) Lc (Labour)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

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Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Labour (food)
Click to edit Master title style Qc

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Labour (food)
Click to edit Master title style Qc

Starting with our allocation of labour between

cloth and food, we can map out the
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Labour (food)
Click to edit Master title style Qc
LFa
LCa

Starting with our allocation of labour between

cloth and food, we can map out the
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A

Labour (food)
Click to edit Master title style Qc
LFa Qca
LCa

Starting with our allocation of labour between

cloth and food, we can map out the
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A

Qfa

Labour (food)
Click to edit Master title style Qc
LFa LFb Qca
LCa

LCb
Starting with our allocation of labour between
cloth and food, we can map out the
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A

Qfb B

Labour (food)
Click to edit Master title style Qc
LFa LFb Qca Qcb
LCa

LCb
Starting with our allocation of labour between
cloth and food, we can map out the
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A

Qfb B

Labour (food)
Click to edit Master title style Qc
LFa LFb LFc Qca Qcb
LCa

LCb
Starting with our allocation of labour between
cloth and food, we can map out the LCc
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A

Qfb B

Labour (food)
Click to edit Master title style C
Qc
LFa LFb LFc Qca Qcb Qcc
LCa
A

LCb
B
Starting with our allocation of labour between
cloth and food, we can map out the C LCc
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A
Qf=Qf( T,Lf )
Qfb B

Labour (food)
Click to edit Master title style C
Qc
LFa LFb LFc Qca Qcb Qcc
LCa
A

LCb
B
Starting with our allocation of labour between
cloth and food, we can map out the C LCc
production that results for each good, and
then the overall productiion

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A
Qf=Qf( T,Lf )
Qfb B

Labour (food)
Click to edit Master title style C
Qc
LFa LFb LFc Qca Qcb Qcc
LCa
A

LCb
B
Starting with our allocation of labour between
cloth and food, we can map out the C LCc
production that results for each good, and
then the overall productiion
Qc=Qc( K,Lf )

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id
 Qf
Combining (i) both production functions, (ii) allocation of labour, and (iii)

Click
Click to
to edit
edit Master
Master title
title style
overall economy’s Production Possibilities Frontier, we can derive a four-

style
quadrant diagram that hightlight the allocation between food and cloth

Qfa A
Qf=Qf( T,Lf )
Qfb B

Labour (food)
Click to edit Master title style C
PPF Qc
LFa LFb LFc Qca Qcb Qcc
LCa
A

LCb
B
Starting with our allocation of labour between
cloth and food, we can map out the C LCc
production that results for each good, and
then the overall productiion
Qc=Qc( K,Lf )

Labour (cloth)
Jl. Majapahit No. 62 Mataram | unram.ac.id