Ricardian Model - World Equilibrium (Demand Supply)

Demand equation; Supply Function - Step function
Answer sheet: tinyw.in/BMHp
When a large Country trading with a small country: The small country would specialize but a large country will produce both goods.
Content for an undergraduate course in Economics - International Trade | B.A. Honours | Econ Major

[@abramvi3439]

The whole semester explains in one video. Thanks for sharing

[@NishaMalhotra]

Glad it was helpful!

[@jonathanwieler8863]

THANK YOU! You explained this so much better than my teacher!

[@NishaMalhotra]

Happy to help!

[@sakibzubayer6827]

Such a wonderful explanation. Thank you, Professor, you saved me.

[@NishaMalhotra]

Glad it helped!

[@Anshaj]

Watching this video = Exam is near. :D
Anyway, nice demonstration.

[@binurikarunasekara1890]

Hi thanks for a great video. can you please explain how you came to the conclusion that "the home country produces both goods and foreign country specializes in B" at the very end

[@NishaMalhotra]

comparing the new world price and the opportunity cost in the 2 countries. Also, note the placement of the world demand function.

[@catherinesame5845]

is the opportunuity cost of producing one apple more not instead 2/3 units of banana?
I am kind of lost

[@RinLaHarlequin]

Catherine Same It is 3/2 and not 2/3 because you are thinking about the OC of output goods. Here, the example is about input resources, which means that instead of finding the OC of Apples by dividing Bananas/Apples, you need to do the exact opposite. Notice here that Ms. Malhotra listed unit labor requirements (ULR) instead of output (finished) goods.
To find the OC of apples using unit labor requirements, it is actually ULR of Apples/ULR of Bananas.

[@ahherng9822]

omg finally found this vid that explain the ques I have been struggling, thanks!

[@boburjonyoqubov547]

so Foreign in this case will produce 800 bananas and home? i know it will be incomplete specialized but how can we find out exact numbers ?

[@christophrixe466]

Thank you very much for this Video ;D
Helped really much to explain the solutions of the textbook.

[@Olav3D]

I think I finally got it, thanks :)

[@jessicabeal7584]

what would the demand function be if DA/DB = PA/PB (so not using the inverse)? or would you not get a question like that as the numbers for the demand function would be really far away from the supply function?

[@travelbuddy7616]

Thank you this was really helpful

[@warrenluke6116]

thank you for clearing this up :)

[@trentminor2452]

very informative, thank you.

[@ellylang118]

thank you so much for this video, seriously

[@NishaMalhotra]

You're so welcome!

[@annabelsmyth8263]

Thank you! you helped me so much with my assignment.

[@NishaMalhotra]

You're very welcome!

[@michaelsterg8762]

I don't understand how you go from Pa/Pb to 1/(Pa/Pb) ?

[@NishaMalhotra]

Is this related to the demand function?
It's Pb/Pa and since our vertical axis is Pa/Pb - we should express the demand equation as a function of Pa/Pb
Pb/Pa = 1 / (Pa/Pb)

[@michaelsterg8762]

@@NishaMalhotra Thank you for the clarification. I had missed that the graph Y axis was the inverse. It makes sense now!

[@stevenbag6626]

how does demand for apples over demand for banana equal the inverse of the two prices?

[@NishaMalhotra]

The equation for the demand function was provided in the question.

[@hyunchulshim3387]

Why would the demand curve be concave, not linear?

[@NishaMalhotra]

It wouldn't change the results.

[@boburjonyoqubov547]

so everytime when i need to find RD i can use 1/pa/pb i mean will it be always 1 ?

[@NishaMalhotra]

For this question we have been provided the equation for the demand function. But, that's not always the case. So, no it would be different and will depend on the question. You might be told that the two countries completely specialize in the production of the good in which they have comparative advantage - in that case the RD will cut the RS in the vertical region but we can't specify the exact world price - all we can say is that it will be between the OC of the two countries.

[@fahmidurrahmanplabon9619]

thanks a lot................

[@ananyamalu1408]

the answer sheet isnt opening

[@LeciHere]

But what if the demand is in autarky? How would you write the demand equation

[@boburjonyoqubov547]

remember always, in autarky D=consumption is equal to S=production, in other words if economy produces 800 goods so consumption ( demand) will be 800,

[@ishmamomi]

Thanks a lot :)

[@monkeyninjja7]

How do both countries benefit from trade in this scenario?

[@NishaMalhotra]

Only foreign country gains from Trade. Home is the large country.

[@cameronlukewilson281]

Fantastic

[@youraliensister9642]

really helped. Thanks

[@murataydn2027]

teşekkürler.

[@manosko6269]

i love you

[@Taki47G]

Its unfinished. You should show the offer and demand for the other country and then make the world offer and demmand equilibrium.

[@NishaMalhotra]

That's another video tutorial - If there is enough demand I'll put that together. I like to keep tutorials to one concept/question.

[@Taki47G]

@@NishaMalhotra I see, thanks for the good content

[@pauld7512]

Hi, so in that situation, only foreign country gains from trade, correct?

[@ayushmalhotra1489]

HIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII!

[@NishaMalhotra]

Heeeeyyyyyy