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H3 Economics – Theme 3 Compilation
Content Outline:
1. Summary of Trade Theories (pg 1 – 6)
2. Case Studies
I.
European Union (pg 7 – 21)
II.
United States of America (pg 22 – 35)
III.
China (pg 36 – 56)
IV.
ASEAN (pg 57 – 69)
V.
Korea (Short Article) (pg 70- 71)
VI.
Nigeria (Short Article) (pg 72)
3. Transnational Corporations & their effects (pg 73 – 76)
4. Globalisation, Multinational Enterprises & Emerging Economies
(pg 78-83)
Ricardian Model
The Ricardian model encompasses that the differences in productivity of labor between countries cause productive differences, leading to gains from trade. Differences in productivity are usually explained by differences in technology.
A country has a comparative advantage in producing a good if the opportunity cost of producing that good is lower in the country than it is in other countries.
A country with a comparative advantage in producing a good uses its resources most efficiently when it produces that good compared to producing other goods.
When countries specialize in production in which they have a comparative advantage, more goods and services can be produced and consumed.
A slightly more complex one factor Ricardian model use the following simplifying assumptions: 1. Labor is the only resource important for production.
2. Labor productivity varies across countries, usually due to differences in technology, but labor productivity in each country is constant across time.
3. The supply of labor in each country is constant.
4. Only two goods are important for production and consumption
5. Competition allows laborers to be paid a “competitive” wage, a function of their productivity and the price of the good that they can sell, and allows laborers to work in the industry that pays the highest wage.
6. Only two countries are modeled: domestic and foreign.
Take note:
Suppose that the domestic country has a comparative in the production of
Content Outline:
1. Summary of Trade Theories (pg 1 – 6)
2. Case Studies
I.
European Union (pg 7 – 21)
II.
United States of America (pg 22 – 35)
III.
China (pg 36 – 56)
IV.
ASEAN (pg 57 – 69)
V.
Korea (Short Article) (pg 70- 71)
VI.
Nigeria (Short Article) (pg 72)
3. Transnational Corporations & their effects (pg 73 – 76)
4. Globalisation, Multinational Enterprises & Emerging Economies
(pg 78-83)
Ricardian Model
The Ricardian model encompasses that the differences in productivity of labor between countries cause productive differences, leading to gains from trade. Differences in productivity are usually explained by differences in technology.
A country has a comparative advantage in producing a good if the opportunity cost of producing that good is lower in the country than it is in other countries.
A country with a comparative advantage in producing a good uses its resources most efficiently when it produces that good compared to producing other goods.
When countries specialize in production in which they have a comparative advantage, more goods and services can be produced and consumed.
A slightly more complex one factor Ricardian model use the following simplifying assumptions: 1. Labor is the only resource important for production.
2. Labor productivity varies across countries, usually due to differences in technology, but labor productivity in each country is constant across time.
3. The supply of labor in each country is constant.
4. Only two goods are important for production and consumption
5. Competition allows laborers to be paid a “competitive” wage, a function of their productivity and the price of the good that they can sell, and allows laborers to work in the industry that pays the highest wage.
6. Only two countries are modeled: domestic and foreign.
Take note:
Suppose that the domestic country has a comparative in the production of