Case Study 1 (1).pdf X + C X File | C:/Users/Savani/Downloads/Case%20Study%201%20(1).pdf 1 of 3 Q +2 0 Page view A Read aloud | Add text Draw Highlight Erase Case Study Trade Is Important To understand stories about how trade works, it is of world exports. Most goods are traded across useful to know some of the key facts about trade. A national borders, as are many services, including good start is a broad overview of the products traded transportation, computer and information services, and trade's growing importance. as well as insurance, consulting, and educational How large is international trade? What products services. For the world, a little over half of trade is in are traded? The table below shows exports by major manufactured products, with the rest of trade split product categories, for the world overall and for two between primary products and services, By compar- broad economic groups of countries, the industrial- ng the details across the columns, we can see that Ized for developed or advanced) countries and the the broad pattern of exporting by the industrialized developing countries, countries has some differences from the pattern for In 2016, world trade was nearly $21 trillion, with developing countries, Industrialized countries export the industrialized countries contributing 57 percent relatively less of primary products, especially fuels. Exports, 2016 (billions of U.S. dollars) Industrialized Developing World Countries Countries Total 20.819 11,855 8,964 Primary products 4.174 1,929 2.245 Agricultural 1.609 690 Fuels 1,511 495 ,016 Ores 1,054 515 539 Manufactured products 11,256 6,177 5,079 Chemicals 1,821 ,280 547 Machinery and transport equipment 5.862 3.153 2.710 Textiles and clothing 752 217 535 Other 2,820 1.528 1,292 Services 4,879 3.337 1.543 Note: Sum of primary products, manufactured products, and services does not equal total because of a small amount of unclassified goods. Source: UNCTAD, UNCTADStat willing and able to pay for the product. For a market price of $2,000 in Figure 2.1A, the consumer surplus is the difference between the total value to consumers (area c + ( + w) and the total payments to buy the product (area / + w). Consumer surplus thus is equal to area c, the area below the demand curve and above the price line. This contribution to the economic well-being of consumers through the use of this market is $32 million, equal to (1/2) x ($3,600 - $2,000) x 40,000. A major use of consumer surplus is to measure the impact on consumers of a change in market price. For instance, what is the effect in our example if the market price of motor- bikes is $1,000 instead of $2,000? Consumers are better off-they pay a lower price and O Type here to search 199 + R AYO ENG 11:10 AM 10/9/2022Case Study 1 (1).pdf X + X G File | C:/Users/Savani/Downloads/Case%20Study%201%20(1).pdf 2 of 3 Q +2 0 Page view | A Read aloud Add text | Draw ~ Highlight Erase Exports Plus Imports as a Percentage of GDP measuring the size of a country's economy). These measures are not completely comparable (exports 1970 2016 and imports measure full sales values, while GDP United States 11.1 26.6 measures value added). Still, they provide a reason- Canada 42.1 64.4 able way of comparing the importance of trade across time and across countries. Japan 20.9 31.3 France 31.1 60.5 Here are a few observations about what we see United Kingdom 43.3 58 4 in this table. First, for each of the countries shown Australia 25.9 39.7 in the table (and for most other countries], Interna Denmark 57.1 101.0 tional trade has become more important. Trade's China 5.3 369 increasing importance is one part of the process of India 80 39 8 globalization-in which rising international transac- Korea 33.4 77.7 tions increasingly link together what had been rela Brazil 14.9 24.4 tively separate national economies. Second, trade tends to be more important for countries with smaller economies (such as Canada, Denmark, and Source: International Monetary Fund, International Financial Statistics. South Koreaj and somewhat less important for very large economies (such as the United States and Japan). Third, both China and India have gone from In manufactured products, Industrialized countries being mostly closed to trade to much more open export relatively more of chemicals, while develop- and involved. The experiences of China and India ing countries export relatively more of textiles and in the past several decades are rather close to the clothing, Industrialized countries are relatively approach we will take in Chapters 2-7-imagining strong in exporting services. We will use this kind of a national economy with no trade and then drawing observation-looking at trade across product out what will happen when the country opens up to categories-as we examine why countries trade with free trade. each other, How Important is International trade in the econo- mies of various countries? The second table in this DISCUSSION QUESTION box examines one measure of the Importance of Given the trends shown here, do you think that trade to a country: the ratio of the sum of a country's international trade should have become more con- total trade (exports plus imports) to the country's troversial or less controversial than it was several gross domestic product (GDP, a standard way of decades ago? decide to buy more. How much better off? Consumer surplus increases from a smaller triangle (extending down to the $2,000 price line) to a larger triangle (extending down to the $1,000 price line). The increase in consumer surplus is area ? + d. This increase can be calculated as the area of rectangle r. equal to ($2,000 - $1,000) x 40,000, plus the area of triangle d, equal to (1/2) x ($2,000 - $1,000) x (65.000 - 40.000). The increase in consumer surplus is $52.5 million. The lower market price results in both an increase in economic well-being for consumers who would have bought anyway at the higher price (area () and an increase in economic well-being for those consumers who are drawn into purchasing by the lower price (area d ). O Type here to search 8 AGO ENG 11:10 AM 10/9/2022