International Economics (751401) Session 2 21/06/54 The Basic Theory Using Demand and Supply Aj.Noom (anuphak@gmail.com) Tel. 08-3542-6434

International Economics Is Different Four Events 1) International Outsourcing 2) Poor Worker in Poor Countries 3) The Trade Union Countries 4) The Rising of Sovereign Wealth Funds

Key Questions About International Trade Why do countries trade? More precisely, what determines which products a country export and which products it import ? How does trade effect production and consumption in each country ? Which country gain from trade ? Which in each country, who are the gainers and losers from opening trade ?

Trade Usually Results from The Interaction of Competitive Demand and Supply. What are the factors influencing the demand ? Supply What are the factors influencing the supply ? Supply Demand What will happen if the demand and supply are unmatched ?

Demand and Supply for Motorbikes Consumer Surplus Producer Surplus Consumer Surplus Producer Surplus

The Market for Motorbikes: Demand and Supply No-trade Equilibrium Consumer Surplus Producer Surplus

The Effects of Trade on Production, Consumption, and Price, Shown with Demand and Supply Curves World Price with Trade Pre-trade Price Dx Exports Sx Sf World Price with Trade Df Imports Pre-trade Price

The Effects of Trade on Production, Consumption, and Price, Shown with Demand and Supply Curve

The Effects of Trade on Well-Being of Producers, Consumers, and the Nation as a Whole Which one better ?

Key Concerned Issue Regarding Net Nation Gain One dollar, one vote The Welfare Effects

Which Country Gain More ? Consumer Surplus Dx Sx Sx = Represent Exporting Country Producer Surplus Dx = Represent Importing Country

Price Change (percent) Country Pre-trade Price Free Trade Price Price Change (percent) U.S. (Importer) 2,000 1,000 100% The Rest of the World (Exporter) 700 30% Gain More

Importing Country (U.S.) Exporting Country (The Rest of the Word) Take Some Advantages Consumers What if they are rich ? Take Some Disadvantages Producers What if they are poor ? Exporting Country (The Rest of the Word) Take Some Disadvantages Consumers What if they are poor ? Take Some Advantages Producers What if they are rich ?