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Understanding Global Market

This discussion explores the principles of comparative advantage through the scenario of Sumanto, a talented painter and carpenter, and his equally skilled neighbor, Hannibal. Although Sumanto has an absolute advantage in both trades, the importance of specialization and trade is highlighted by comparing their production efficiency. By analyzing their work over six days, we demonstrate how Sumanto can optimize earnings through specialization, leading to enhanced total production. This case exemplifies the benefits of international trade, including job creation, cost savings, and economic growth.

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Understanding Global Market

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Presentation Transcript

  1. Understanding Global Market

  2. David Ricardo shapes modern economy

  3. It is better to trade than to produce everything on your own

  4. If You Were Sumanto, What Would You Do? • Sumanto is a gifted painter as well as superb carpenter. He need one day to finish a drawing, as well as a furniture. A painting is worth $400 and a furniture is worth $350 • Sumanto’s neighbor called Hannibal, is exactly as skillful as he is. The only difference, Hannibal needs 3 days to finish a painting and 1.5 days for a furniture. • You absolutely have advantage over Hannibal. DO YOU? ;)

  5. Let’s Compare!! Before Trade After Trade (Specialization) For 6 day work, Sumanto earned $2400 in total VS Hannibal $1400 Total production is 10 unit • For 6 day work, Sumanto earned $2250 in total VS Hannibal $1100 • Total production is 9 production unit

  6. Comparative advantage stipulates that countries should specialize in a certain class of products for export, but import the rest - even if the country holds an absolute advantage in all products

  7. ElecHeckscher and Bertil Ohlin

  8. Factor Proportion Theory revises Ricardo’s theory. It explains the factor behind Comparative Advantage.

  9. COMPETITIVENESS

  10. How to Measure Competitiveness?

  11. REER Index: Indonesia ManaDatanya? #Facepalm

  12. ManfaatPerdaganganInternasional • Menghasilkandevisanegara • Memperolehbarang yang tidakdapatdiproduksidinegarasendiri • Buah Kiwi & Cherry • Memperolehbarangdenganhargamurah • Hargagula putihmeroket, pemerintahimporgula putih • Memperluaspasardanmenambahkeuntungan • Economy of scale • Menimbulkanlapangankerja • Meningkatkankemampuan SDM yang handal • Transfer teknologi modern

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