经济学基础(著名讲师).pptVIP

An Introduction to International Economics Chapter 3: The Standard Trade Model Dominick Salvatore Increasing opportunity costs Increasing amounts of another item must be given up in order to release sufficient resources to produce one more unit of a given item. What leads to increasing opportunity costs? Non-homogenous factors of production Factors that are not used at constant fixed proportions in production Implications for the production possibility frontier The marginal rate of transformation (MRT) increases as more units of good X are produced. The marginal rate of transformation is another name for opportunity cost. The value of MRT is given by the slope of the PPF. Community indifference curves A community indifference curve displays the combinations of two products that offer the community the same level of satisfaction. Characteristics of community indifference curves Negative slope Convex to the origin Different curves do not cross A community indifference curve map The marginal rate of substitution (MRS) falls as more of good X is consumed. The MRS is the amount of one commodity that must be given up as one gains additional units of another commodity. The autarky equilbrium Autarky exists in the absence of international trade. The autarky equilibrium occurs when maximum societal satisfaction has been obtain from available production. This will occur when one community indifference curve is tangent to the PPF. The autarky equilbrium For the indicated case, the equilibrium occurs at the tangency of community indifference curve II and the PPF. Given the convex, downward sloping, and non-intersecting nature of community indifference curves, only one such tangency will exist. Relative prices The equilibrium relative commodity price in isolation (or autarky) is given by the slope of the tangent. The slope of this tangent is Px/PY or the price of good X divided by the price of good Y. This slope also gives the opportunity cost of producing X in terms of fore