Trade Blocs and Trade Blocks Frederick University 2012.
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Transcript of Trade Blocs and Trade Blocks Frederick University 2012.
![Page 1: Trade Blocs and Trade Blocks Frederick University 2012.](https://reader036.fdocuments.in/reader036/viewer/2022082713/56649f165503460f94c2c7e1/html5/thumbnails/1.jpg)
Trade Blocs and Trade Blocks
Frederick University
2012
![Page 2: Trade Blocs and Trade Blocks Frederick University 2012.](https://reader036.fdocuments.in/reader036/viewer/2022082713/56649f165503460f94c2c7e1/html5/thumbnails/2.jpg)
Types of Economic Blocs Type of Bloc
Free Trade among the members
Common external tariffs
Free factor movement
Policies harmonization
Free trade area
X
X
X
X
Customs Union X
Common market
X X
Economic Union
X X X
![Page 3: Trade Blocs and Trade Blocks Frederick University 2012.](https://reader036.fdocuments.in/reader036/viewer/2022082713/56649f165503460f94c2c7e1/html5/thumbnails/3.jpg)
Trade DiversionP
Q
D
Initial price (with a tariff) in CyprusP0
Egyptian price
Q0 Q1
P1
Greek priceP2
Q2
All rice Q0 is imported from Egypt
Imports from Egypt are replaced byImports from Greece (an EU member)
A
Extra imports Q0 + Q2 are created
B – national loss = (P2 – P1) x Q0
B
Trade diversion = B - A A – Cyprus gain
C
C – tariff collections shift to consumer surplus in Cyprus
![Page 4: Trade Blocs and Trade Blocks Frederick University 2012.](https://reader036.fdocuments.in/reader036/viewer/2022082713/56649f165503460f94c2c7e1/html5/thumbnails/4.jpg)
Trade CreationP
Q
D
Initial price (with a tariff) in CyprusP0
Egyptian price
Q0 Q1
P1
Greek priceP2
Q2
All rice Q0 is imported from Egypt
Imports from Egypt are replaced byImports from Greece (an EU member)
A Extra imports Q0 + Q2 are created
B – national loss = (P2 – P1) x Q0
B
Trade creation = A - B
A – Cyprus gain
C
C – tariff collections shift to consumer surplus in Cyprus
![Page 5: Trade Blocs and Trade Blocks Frederick University 2012.](https://reader036.fdocuments.in/reader036/viewer/2022082713/56649f165503460f94c2c7e1/html5/thumbnails/5.jpg)
Terms of Trade
TT = Ix : I m
Ix = P1x Q0v : P0 x Q0x
I m = P1m x Q0m : P0m x Q0m
![Page 6: Trade Blocs and Trade Blocks Frederick University 2012.](https://reader036.fdocuments.in/reader036/viewer/2022082713/56649f165503460f94c2c7e1/html5/thumbnails/6.jpg)
Terms of Trade Use the data from Table 1 to calculate and explain the Terms of
trade of Leisureland if it imports goods A, D, and C and exports goods B, E, and F.
Q of A
P of A
Q of B
P of B
Q of C
P of C
Q of D
P of D
Q of E
P of E
Q of F
P of F
2010 25 $40 20 $50 150 $60 10 $40 100 12 70 60
2011 22 $45 30 $40 120 $70 15 $40 150 10 60 70