Read the summary and the most important questions on International Political Economy of Trade lectures

• V1. Demand & supply and the effects of trade

  This is a preview. There are 12 more flashcards available for chapter 10/02/2021
  Show more cards here

• What is demand in IPE?

  Amount of a product that a sum of consumer consumers constituting a market want to consume

• What is demand depended on?

  Price of the product, other products prices, income, consumer taste, etc. 
  
  Demand curve:
  Quantity on x-as, price on y-as > Always downwards sloping

• What is elasticity? And what does the demand curve look like for different elasticities

  Percentage change of demand that results from a one percentage point increase in the price
  
  Different products have different elasticities.   
  
  Steep curve: less elastic, less sensitive to  price changes
  Flat curve: very elastic, sensitive to price changes

• Why are there shifts in demand curves?

  Stimulate the economy: More income > willing to pay more > shift to the right (outwards shift)
  
  Constrict the economy: Willing to pay less > shift to the left (inward shift)

• For what price are firms usually willing to produce?

  In a competitive market Firms are willing to produce as long as price is higher than marginal production costs  
  
  

• What is the slope of the supply curve?

  Upwards sloping

• What does the elasticity of the supply mean?

  The percentage increase in the amount that producers are willing to produce for each percentage point increase in the price of the product they are producing.

• V2. Absolute and comparative advantage

  This is a preview. There are 12 more flashcards available for chapter 10/02/2021
  Show more cards here

• What is Adam Smith's household analogy and what does it mean?

  It is the maxim of every prudent master of a family never to attempt to make at home what it will cost...more than to buy.
  
  Don't spend time you could use for something you're good at on something you're not good at. Instead, use the money you get from the thing you are good at for the thing you are not good in (from someone else that is good in it)

• What is absolute advantage

  Extension to society as a whole: Material well-being is maximized if people specialize in what they are best at and exchange
  
  Extension to world economy: nations should do what they do best and trade for the rest > specialize!

• What is the assumption of absolute trade (when should there be specialization to gain absolute advantage)

  Gains of trade are intuitive as long as one country is clearly better at doing one thing and the other country is clearly better at doing the other