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INTERNATIONAL TRADE
Given (DTOT):
US 1 F = 1 lh = 1/2 C (COMPARATIVE ADVANTAGE)
1 C = 2 lh = 2 F
Europe 1 F = 3 lh = 3/4 C
1 C = 4 lh = 4/3 F (COMPARATIVE ADVANTAGE)
ITOT US gds US lh Europe gds Europe lh
1 F = 2/3 C 1/3 C ∀ 2 F ½ lh saved
∀ 3/2F
1/8 F ∀ ¾ C ½ lh saved
∀ 1C
1 F = 1 C 1 C ∀ 2 F 1 lh saved ∀
1F
-1/4 F ∀ ¾
C
1 lh lost ∀
1C
1 F = 1/4 C -1/2 C ∀ 2 F 2 lh lost ∀
4F
2 F ∀ ¾ C 2 lh saved ∀
¼ C
1 F = 3/4 C 1/2 C ∀ 2 F 2/3 lh saved
∀ 4/3 F
Ø Ø
1 F = 1/2 C Ø Ø 1/2 F ∀ ¾ C 1 lh saved ∀
½ C
1 F = 2/5 C -1/5 C ∀ 2 F ½ lh lost ∀
5/2 F
7/8 F ∀ ¾ C 7/5 lh saved
∀ 2/5 C
1 F = 4/7 C 1/7 C ∀ 2 F ¼ lh saved
∀ 7/4 F
5/16 F ∀ ¾
C
5/4 lh saved
∀ 1 C
**OMG WAIT HEHE CAN SOMEONE RECHECK THE GIVEN AND
ANSWERS!!! I JUST GOT THAT FROM SOMEWHERE YEAAAAH LABYU
ALL**
How to solve for goods: (LONG METHOD)
For example: Given the DTOT stated above and ITOT 1F = 2/3 C
US 1C + 1F (Before Trade)
2F + 1F (to be exported)
4/3 C + 1F (IMPORTED; After Trade)
Thereforeeeee...
4/3 C (after trade) – 1C (before trade) = 1/3 C gained for every 2F
exported!
Europe 1F + 1C (Before Trade)
¾ C + 1C (to be exported)
9/8F + 1C (IMPORTED; After Trade)
Thereforeeeee...
9/8F (after trade) – 1F (before trade) = 1/8 F gained for every ¾ C
exported!
How to solve for labor hours: (LONG METHOD)
Given the same DTOT and ITOT:
US 1F + 1C (Before Trade) = 3 hours
1F + 3/2 F (use ITOT)
1 lh + 3/2 lh (After trade) = 5/2 hours
Thereforeeeee…
3 hours (before trade) – 5/2 hours (after trade) = ½ hour saved for every
3/2 F exported!
Europe 1F + 1C (Before Trade) = 7 hours
2/3 C + 1C (use ITOT)
8/3 lh + 4 lh (After Trade) =20/3 hours
Thereforeeeee…
7 hours (before trade) – 20/3 hours (after trade) = 1/3 hours saved for
every 2/3 C exported!
How to solve for goods: (SHORTCUT METHOD)
Given the same DTOT and ITOT:
US ITOT – DTOT = clothers per food
(1F = 2/3 C) – (1F = ½ C) = 1/6 clothes per food exported
How to solve for labor hours: (SHORTCUT METHOD)
Make it like parang stoichiometry lang, y’know
Uhuh, uhuh!! Dimensional Analysis omg soooo freaking fetch!
Given the answer above (1/6 clothes per food exported):
1 clothing x _2 hours_ = _1 hour_
6 food clothing 3 food
ALWAYS REMEMBER aka CAUTION WHEN SOLVING FOR THE LABOR
HOURS!!!!
When using the Long Method, a negative answer does not mean
that the answer is right! Because it means that it’s wrong
hahahahaha because yeah hirap i-explain dito Facebook
message nalang
However, when using the Shortcut Method, a negative answer is
always right! YEAH!!!!
** Kaya niyo na isolve yung sa Europe, tinatamad na me omg!!! THE
BUZZ NA EH HEHEHEHEHEHEHE **