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1、Chapter2-TheBasicTheoryUsingDemandandSupplyChapter02TheBasicTheoryUsingDemandandSupplyOverviewThischapterindicateswhywestudytheoriesofinternationaltradeandpresentsthebasictheoryusingsupplyanddemandcurves.Tradeisimportanttoindividualconsumers,toworkersandother
2、factorowners,tofirms,andthereforetothewholeeconomy.Thebox“TradeIsImportant”providesusefuldataaboutthetypesofproductstradedandtheincreasingroleoftradeinnationaleconomies.Tradeisalsocontentious,withperpetualbattlesovergovernmentpoliciestowardtrade.Tounderstandt
3、hecontroversy,weneedtodeveloptheoriesofwhypeopletradeastheydo.Itisusefultoorganizetheanalysisofinternationaltradebycontrastingaworldofnotradewithaworldoffreetrade,leavinganalysisofintermediatecases(e.g.,non-prohibitivetariffs)forPartTwo.Theanalysisseekstoansw
4、erfourkeyquestionsaboutinternationaltrade:1.Whydocountriestrade?Whatdeterminesthepatternoftrade?2.Howdoestradeaffectproductionandconsumptionineachcountry?3.Whatarethegains(orlosses)foracountryasawholefromtrading?4.Whataretheeffectsoftradeondifferentgroupsinac
5、ountry?Aretheregroupsthatgainandothergroupsthatlose?Theoriesofinternationaltradeprovideanswerstothesefourquestions.Basicdemandandsupplyanalysiscanbeusedtoprovideearlyanswerstothesefourquestions,aswellastointroduceconceptsthatcanbeusedinmoreelaboratetheories.U
6、singmotorbikesasanexample,thechapterfirstreviewsthebasicanalysisofbothdemand(thedemandcurveandtheroleoftheproduct’sprice,otherinfluencesonquantitydemanded,movementsalongthedemandcurveandshiftsinthedemandcurve,andthepriceelasticityofdemandasameasureofresponsiv
7、eness)andsupply(thesupplycurve,theroleofmarginalcost,otherinfluencesonquantitysupplied,movementsalongthesupplycurveandshiftsinthesupplycurve,andthepriceelasticityofsupply).Itpaysspecialattentiontothemeaningandmeasurementofconsumersurplusandproducersurplus.Thi
8、ssection,whichfocusesonreviewanddevelopmentofbasictools,endswiththepictureofmarketequilibriuminanationalmarketwithnotradeastheintersectionofthedomesticdemandcurveandthedomesticsupplycurve
