Graph Remind

Consumer / producer surplus

new
as

paxs ,
* indicate :14t
Where CS +?
.
eg

CSB G

PSB Ans : areaCSB + a

new ps
>

elastic +
elasticity
egt WhatconditionWhenPTRis inelasticQ T
 Mind
Map

S
systems
↑
3 problems
↑ LOC)
Econ > Scarcity > choices <cost
competition > discrimination

goods - ↓ X
X
cost
money non-money
free goods ↓
short run

interest MY
↓
law of
diminishing return
supply
productivity
↑ X long

↑
labour
x
public run a
of entrepreneurship > private -
Econodisecon scale
Factor production - land
>
-

↓
capital

F #
collusion
Integration or

Natural
monopoly
of monopoly power Gov
Monopoly
sources ·

monopoly
sole ownership franchise

tech
copyrights
essential resource
#
 ratio
Wut :
type quantities
, ,

↓
3
problems -pation
lland
methods
* All Mainly tackled'
Capital labours
↑ Planned/command
· ,

Traditional :

whom : distribution criteria social custom &

For (GD$1PEX ,'EE)
Gov decision
traditions 3
systems
sole
circular flor ↑ Market :

(gov ↓ actorshouseholds I
↑ Most pri owned

privatepartnera
resources >
public
-

Factor Market Product Macket

mechanism
↓ /signal
M

price
↓ Tpub IFirmodd
·

. lim Revenue
production

Enterprise
cost

PPR(LQ)
Total his
=
working
Population size
per man-hr)
lunit
labour supply - :

condition Total output

-
working
=

↓ X labour supply

labour
labour
-
productivity
↑ incentive work/eduction /tech
- T
to
W
FoP
Mobility
↑
-
Geographical
Occupational
 Econ Note (a)
①Free ④
goods vs Econ
goods Opportunity cost

forgone
S

Pr highest-valued option
D

Q& &S Q,
D
·
oc =
$+ 0 + / +
OF

1 . Yes/No
* OC0 : Ovalue of HVOF0, & cost of chosen option (

.
2 Definition (More of it ↑: ① cost of HVOFC Ovalue of chosen
is /isn't preferred option
:
3. It is /isn't
produced from scarce resources Type A Value

which has alternative use .

F :

<04/1 *

②
2 .
OC =, is HUOF

tre/normative statement :
. value
3 of chosen
option ↑//: OC + // *

F :
1 .
Yes/No Type B : "Time / full cost
(+ re) c-ve)

refutable fact contain value

judgement F +// *
by
:
2
. It is 1 .

2 OC=full cost =
chosen option's money cost + cost
.

non-money
3. Their alternative of time be diff eg
use
may ...
③
,

Private property
rights $/0/94/
4
. : full cost ↑// &

exclusive
right to use

⑦ O
#15 skill %
exclusive right to receive
*
income
ccupational/geographical mobility
<nexclusive :
right to transfer 1 .
T / + In
A
state the skill is (not) & (not) transferable to other
1
.
rights 2
.
specific -easily jobs
2
. explain transport cost network , ,
econ condition , political , social factor 4/ ↓
. State
3 * (4(X)

4 .
which
right /+ O
& Law of demand > Relative price

⑤Public nominal price of E & 1-1 by the amount

1
F same

vs
private good 2 . Relative price of in terms of I decrease

1 Yes/No 3 E
.

One's
. Consumers will consume
relatively more
(C)

. Consumption will reduce the

2 amount available for others' C .
4
. The ratio of E to It sold will 4
3
. These aren't care)
goods rival to consumption
S

PConsumer
producer goods
:
self-consumption/help production .
⑨ Externality * Q. A1 ( "E no · -

:1 of the
.
Reason
problem . The value of is the external cost as A doesn't compensate B. .
There is a

between & social

divergence private cost cost.

2 .
(ve/ + ve) externality results
inefficiency as at the market equilibrium marginal ,
social cost is

social benefit (Ais above/ below the efficient level &

larger/smaller than
marginal .

(15) it)
deadweight loss

exists. =

(-ve) ( + ve)
3. Due to
imposition of tax
subsidy marginal private ,
cost ↑14. · (Q) N/4 towards the

efficient level . The difference between &

marginal social cost
marginal social benefit decreases
& deadweight loss decreases .
Efficiency improves MPC -

FEE how :
involve
externality Q Fin
MPC

#subsidy
In terms of
externality result efficiency
,
= O +

Relieved by market Fie -

A compensate B for the damage in order to produce more . MPC of productiont ,

the output level ↓ to

efficient level .

Elasticity
1 .
S/DO , PAQ

is elastic inelastic
2 .

Demand/supply
3 .% 04 < / >% Q
4 . TRY/ ↓
 Type of Production
Issuing shares bonds

Primary :
use resources
provided by nature v no interest burden x obligation of interest burden
F
turn semi-finished finished
Secondary : raw material into or
products
. ~
repayment obligation have
repayment obligation
no X

Tertiary :
provide services X easier to be taken over no risk of being taken over
the firm
"control
over

power, will be diluted power won't

diluted
X control be
Division of labour
shares bonds
Investing
assign theright to do the
right job ~ have
voting right X don't have
noting right
S
person
~
pros dividend isn't fixed
↓

time saved from

,

learning all the job um

practices make perfect X unstable return ~ stable return as fixed interest

mu
received

Limited skills of workers X

last claim ~ claim be 4 shareholder'
repayment repayment
3
can

cons
work becomes
boring if
company is closed

market size ↓ extent of DoL t 3 limitation

Factor of production
Labour :
human effort provided by a worker used -

Entrepreneurship human effort which make decision and bear risk-f

in production
:

-
Capital :
man-made resources used
A
land :
natural resources used

Time Rate VS Others time piece

workers' * commission
saving cost for ~ save cost of to maintain of staff
measuring supervising workers :
a team

VT
output as workers output aren't standardized workers' incentive to work

~ stable income ~ earn ↑ income if work harder

Sole proprietorship Partnership Private/Public limited

,
company
~
simple set-up procedures X complicated set-up procedures
~ lower tax rate X higher tax rate

X unlimited liability v limited liability

X lack of
continuity
~
lasting continuity

Gov (public Ent) Pri vs Public

loans with the backup of gov . Share (not)
freely transferrable
veasier to
get ~ are

stable service with ↓ price & bonds

~
provide ~ Can (not) issue shares
, to
public
X less sensitive to
price signal * easier to be taken over
over the firm
X hard to recruit experts *
control power, will be diluted

Expansion of firms Motives

All
Horizontal :
same stage ofproductionofsameprois 1
enjoy economies of scale and lower A

Vertical (backward . ↓ &t horizontal

forward) previous later of production 2
competition market share only
stage
:

All except horizontal

Lateral related 3. extend its brand name to other

but not competitive products products
:

Conglomerate :
diff lines of production
 Market structure
Perfect competition Oligopoly Monopoly Monopolistic
price taker searcher searcher searcher

product homogeneous both no close substitutes

heterogeneous
Enter hard hard
easy very easy
dominant
many a few
only one many
info perfect imperfect imperfect imperfect
competition $ non-$ both both

Diff price (Market structure)

~ lower
production cost
lower
quality
~

vless attractive brand name

Natural
monopoly start-up capital requirement
: is
very big so a
huge output is
required to
enjoy economies of scale

the entire
and
satisfy market demand.

some factor are fixed

all factors
O & some are variable ② - are variable
c
Short run us
long run
fee
eg
.
rent ,
registration
Fixed cost/factor of that dun when
cost/factor production change output changes .
:

of when
Variable cost/factor cost/factor :
production that change output changes .
eg
. electricity charges
& MP y law of
diminishing marginal returns ****!! ( + labourt-to-units mpt-to-units (

~
,

given quantity of fixed factor

holding tech
variable factors constant,
more are added successively to a ,

marginal product eventually

drops. - ACTSOPT
& AC > Econ/disecon of scale , optimal scale disecon :

LRTmpet I
Act scale of production ↑

G
·

Firm
may
too
large in scale so the
managerial efficiency
Why ACt ?: (Economies of scale) Internal The market saturated cost
econ so
marking
bulk
purchase of raw materials in production with discount

obtain bank loans at a lower interest rate

Advertising costs are spread over a

larger output.
External :X

More related developed ↓o the of

business will be cost
buying back-up services.
·

worked will be attracted & available for this ↓ &

More more .
More experienced workers will be
region .

employing training cost.

Profitmaximizingeg Mp =
$25

output 234567
-
MC 2325772931
ANS : It is 4 units as at the 4th unit
,
MC =
MR.

profit = 4x25 -in $12 PSEX fixed cost

remind ! fixed cost &MC . PMOX z

Case :
If find new profit when McG* 4

=
TR-ic -

↓$($4) X unit

= 6x25 -

(144 -
6x4) = $30

Function of price
Allocative It direct to the
production of good with
higher price *** 4
:
resources a .

distribute the good & able market price . 14

Rationing It to who
willing to the
:
are
pay

& Income
Equality inequality
equalize income. The benefit while the rich can't.
poor can
get
·

& future
equalize opportunity . Providing the
poor
with opportunities to
improve productivity income

Lorenz Curve & Gini Coefficient

post-tax post-social transfer

>

income of rich decrease while income of poor increase . Income distribute

become more even.

Reasons of
inequality
·

person's human capital ,

tends to be more
homogeneous among job than job
racial discrimination . Ethnic female suffers lower rate
sex
minority a
wage
Time rates are more or less uniform across worker Basic
.

salary often include bonuses , insurance etc .

 Macro 1-3 GDP
Included or not GDP ?

: 1 Yes/No
*
H1$* $ (subsidy)
. <
corresponding
.
2 There is the good service produced by local capital gain > increase in capital doesn't involve production .
resident unit (YXX) official GDP
producing in the current
year
.
illegal transactions no record in

h e
corresponding production) destroyed
is
reproduction
no current product It isn't sold to the market & so not count in .

Calculation of GDP
value -
add expenditure
input deducted at of production only the
expenditure of final goods & service are included.
-

every stage
-

costs are

* all
stage
-
EI
stage ,
"
: ind . tax*DA
subsidy
a final-start ,
It tax He subsidy

X-M :
imports has been included in C ,
I . G, X .
M isn't our production. : will overestimate total production .

Factor which not include in C :

GDP =
C+ 2 + G + (X M) -

factor costttE + tax-

subsidy
2nd-hand net profit H +
Edp
goods not currently produced eg .
goods
transfer of ownership shock shares
eg .
,

eg illegal goods
transactions
reported
>
.

Contribution to GDP
() The sale:
included the in the
pervious year. They aren't current production.
revenue
inventory
The factory used the
imported raw materials .
()) k : production of workers ,
↓ income ,
↓

*
Typhoon :
some production activities still undergo
. (supermarket
eg
emergency
services (

+: middlemen services +
operty price
>
: C & It incomet

Include or not GNI ? GDP =

measure the total market value of production of all local

F. 1 Yes . No resident producing unit

during a specified period
is (not) Hk resident GNI the total from
engaging
.
2 measure income earned
by resident
=

in
production ,

GNI =
GDP + net factor income from abroad

A
imported workers ↑+ will
unemployment rate
GNI> depends on labour
productivity of the imported workers

Nominal GDP vs Real GDP

Real GDP better indicator : free

is
living standard from the effects of price changes in the
year .
Nominal GDP = P + Real GDP (0 in %)
(Y)
(PY)
100

pED
Real GDP Nominal GDPX index at current
100
price
=

period = GDP deflator "

per capita =
lation
price index
Nominal GDP Real GDP =
price index at current period 100
 Living standard FTE GDP ET

of leisure ↑ Leisure time difference P

Amount :
living standard
7 under / over estimate
& in :

deflating PY to
get Y

Undesirable effect of production :

pollution problem ↓ Living standard difference in
population size : dividing GDP
by population
more/less
↓ GDP
get per capita
>
-

price level & material Inflation

import tax & most
daily necessities imported
:
raw are .

& inflation rate it

only result once-and-for-all I P butQ inflation continuous level
:. in . increase in
price

CPI GDP deflator Nominal GDP Real GDP

US +
expected inflation rate
=

only includes consumer goods both consumer & producer goods

has fixed basket of & revised has variable baskets of for
goods good
after a
period of time each
year
.

& inflation
Gain lose in inflation
Anticipated : both Co Dr won't
gain or lose.

No
A will lose gain as the fixed amount of received paid has at
↓ effect when there is
expected -
inflation as
purchasing
of unchange
one
te
power than expected (in

Payment
purchasing

remain
terms of in del power

>
-

lopment rate unemployed population ,

force
-
labour Peak
recovery
↑
recession
trough
loss to
society
:
real GDP highest
↓ lowest

fall output level C ↑ ↓ low

in I
high
·

· loss of human capital unemployment low ↓ ↑ high

·
loss of skills inflation rate
high ↑ ↓ low
 Macro Ch4-5
:
Y AD downward sloping
.
1 real value of wealtht C & It
price level t ,
purchasing power of money t , , ,
aggregate output demanded

#
&
.
2
price level ↓ ,
domestic exports become relatively cheaper & imports become
relatively more expensive volume of exports ↑ import
, ,
net exports ↑

demanded ↑.
Aggregate output

Chousehold)
inflationary/deflationary gap
income taxt disposable incomet CG AD
, , ,
with the
economy facing inflationary/deflationary
is

interest rate 1 , ChIN ADL

(firm)
,

gap
. The excess
demand/supply of inputs would lead to
·

Profit taxt profit after taxk

, ,
It ,
AD+ ↑/ ↓ in
input prices Cost of production ↑ / ↓ Short run
.
.

gou spending transfer

payment ↑ CA ADA
aggregate supply will ↓/↑ over time. Therefore the
restoring
·

on , , , ,

to if and the
Depreciation of domestic Net export demand t ADT
aggregate output inflationary/deflationarygap
·

. ,

business project ,
It ADL
,
is closed.

·
income redistribution C4 ADM ,
,

Y SRAS
upward sloping
price level t adjustment of input prices
,
is imperfect ,
real cost of production t firm employ
, factor inputs , output +

SRAS LRAS

factor costs (oil prices labour

supply
-
-

supply shocks -
labour productivity

sale tax
-
-

productive capacity
-firm
expectation
Macro 6-7 :
Principle of taxation

equality the tax

payments should be in proportion to be
taxpayers' income .
->

the time & method of tax

convenience
payment should convenient to
taxpayers
->
.

certainty >
-

taxpayers should be certain about the taxes to be

paid eg .
amount , method ,
timing
.
the administrative cost of tax collection should be low
economy possible.
>
-
as as

Types of tax ·

> increases when the taxable income increases.

progressive tax rate
·

average
-

proportional rate remain

unchanged When the taxable income increases
> tax
average
· -

regressive
·

The tax rate decreases

taxpayers amount of tax for the same
>
the
purchasing
-

same as
pay .

taxable income increases .

direct >
-

taxpayer can't shift the tax burden to another party.

indirect > -

taxpayer can shift the tax burden to another party.

Source principle
derived from
>
only income
Hong Kong are liable to tax
-

Direct vs Indirect Tax

1. Direct tax revenue & under diff econ condition

salaries >
employment > income

profits
>
business >
profit tax revenue

>

properties
>

2 direct tax can't gou'

.

Why stabilize revenue

-Direct of which to
tax is
mainly composed profits salaries tax are proportional or
progressive incomes.

condition GDP + (4) salaries & ↑(d) direct tax

When econ are
good ,
,
profit , revenue ↑ (4) .
.
3
Why indirect tax can stabilize

More people taxable

goods & need to taxes the tax base will be widened .
consuming the services
pay ,

The revenue collected fluctuates less .

Aging
4
. tax
population revenue

Get
elderly may
hu t income & I need of medical services.

which ↓ G revenue
working-age population are
majority of
taxpayers .

Fiscal
Policy (in AD
Expansionary (deflationary Contractionary (inflationary)

on income distribution

Case
of
P
V

inter
more even distribution income

: rich the same tax rate while low-income households

pay
low tax rate in the tax structure .
pay
Income ( a new
40k 80k Rok

case 2 :

refunded 10 % of tax ~ widen the wealth gap

to
taxpayers rich rebated
larger of
money than poor
: were a amount .

case 3 :

↑ standard ↓ Gini
tax rate ~
post-tax coefficient

lower while need

·
Higher income
grp has post-tax income
poor
dun to

tax.
pay
 on AD (special case

* AD :ETA policyBAD I

: C It 4 :7 I
,

For :· I education infrastructure ↑ productive & LRAS

in or
capacity labour
productivity .

I MAD more as people will

saving and not to spend all cash to consume .

It whichI
Against public exp eg infrastructure high administrative .
cost
:
·

cash-sharing benefits ppl immediately while benefit of I need to take

a
longer time.

- - - -

"income tax rate

↓ DI
pro ↓ C ADLP relieves
inflationary
:
,
press

income tax are proportional . It helps ↓ income

inequality .

ADt it may
deflationary
con : result in .
gap
↑ disincentive the welfare ↓ deficits .
to work ,
more
people quit job ,
rely on
programs , budget

Budget G
Economy
* ADV (
CADT
surplus R > E
expansionary/neutral / contractionary
Deficits RE expansionary
Balanced R E
expansionary
=
 Macro 8 9 -

The Bartery Economy

·

lack of double coincidence of wants

Money
Definition :
is
anything that is
generally accepted as a medium of
exchange
.

Functions :

Medium of & services .BE

·

exchange > serves

-
as a medium to facilitate ppl's buying &
selling of
goods
Store of value > PpI the
power for
future ***
can store
purchasing spending on
goods and services
·

up
-

Money goods &

Unit of account > is used to & value of
express the prices services .
-

T
unit
standard of deferred future payment in terms of -
payment expressed
>
is money
-

Properties :

Durable > not to be

damaged
-

easy
have
&
Homogeneous
>
uniform
phy characteristics
-

I
Portable > around * diamond/pearls not portable !
easy to
carry
-

stable in value be used for of time

long period
>
-
can a

Divisible >
divided into diff denominations without decrease in total value
causing
-
a

Generally acceptable

Functions of Central Bank & HKMA

& monitor
To
supervise the
monetary sector
·
To act as the leader of last resort
To
carry out monetary policyE

Mi (p/cash non-bank public)

held
by + D2 (demand deposit)
:

M2 : Mi + Sc Tc + NCD-
+
(saving ,
Time ,
negotiable certificates
by LB)

Ms :
M2 + Trib + NCDrlb + Tata + NCD At
Process

Case 1 :
(deposit/lend excess reserve) Case
* 2
Step :

O
As the the O Q 28 P
initial cash deposit accepted by amount deposited .
+ + +
reserves increase
+

,
goes on

③
-

②
There The the The loan lent out will &
is excess reserve .
backing system will lend out excess reserves . on unit the actual reserve =

-
④
process go on d
of the
re-deposited to the
banking system. This on unit the whole amount required
-
reserve e.

initial deposit created as

required reserves· Total bank deposit↑ by a multiple .

Case 3 : (withdrawal /↑ required ratio * Case 4

Step :

As the initial cash bank t

deposit withdraw ,
reserve · Banks run into reserve
shortage. As I
required ratio ,
banks have

Banks need to call back loans . There are further withdrawals of bank deposits to repay insufficient reserve . O + 0 +

the loans. The process goes on and on .

Total bank deposity by a multiple . (but X "further" -

Assumptions :
why
i deposits
=
max .
↑ = Cr .
creation

1. Bank keep AdAAR & 1 Hoan lent out

reserves,
excess + ↓
no
money re-deposited
,

2
. There is no cash leakage

Factor If the effectiveness of the market

open operation .

The demand for loan isn't sufficient be ↓

.
Loans that can lent out .

Money re-deposited into the banking

Banks
system would t . are less able to create deposits . The effectiveness of
monetary policy
↑
.
 Macro 10-11
Liquidity
&
measures how
easily quickly the asset convert into
money
without
losing market value.

not 100 % risk-free asset

Money
-
: Inflation ↓
purchasing power of Real rate of return
money :
rry
:

If
country is
politically unstable , exchange of local
currency + ,
purchasing power in terms of foreign goods
+)-re .

Money isn't

store of value in times of

a good

of
Income-earning asset : Return
Holding Money (high inflation.

↑
-
pro
:
purchasing power ↑ in times of inflation Actual real = Nominal -
Actual inflation

con :
Liquidity + nominal rate of return of holding money
=

opportunity cost of holding $ =

nominal interest rate

Transaction Demand (Mt) Asset demand (Ma) hold I has to

give up
the return on
holding other

P + Met ·
Wealth ↑MaY income-earning asset like bonds.

YT M + + ·

risk of hold other $4Mat

payment tech ↑M ++
-
Monetary policy
R ↓ MsT
time interval +
Expansionary
:
·
M+ +
CRAS SRAS
Nominal
Maz
interest rate
Ma ,
mini .
reserve ratio ↓
Mt
* ↓ nominal interest rate MaX discount rate ↓ T

Te
un
↓
Ma
just movement
along Open market :

purchase bonds Ap ,B
y
>
-

Ma
MsTR+C I PADY

↑ deflationary gap
,

Quantity >
-

of
L
money
MS
Contractionary :
R4Ms ↓
M&T rT
MsTr ↓ Ms = Mo

100 %
:
required reserve ratio as

Ms Mo
reserve

Money supply Ms <p + = D : Under fractional

, system ,
banks are able to use their excess reserves

Monetary base Mo =
<p + RE to create loans ,
which
eventually will be deposited back into the banks

as deposits resulting
, in a multiple + in deposits.
Quantify Theory of
money
MV = PYWhere Minominal
money supply
v
of circulation of
velocity
:

money
P :
Price level

Y :
real GDP

V is held constant

* % T ↓
 Macro Ch12-13
Absolute Advantage (E)

1 draw
.

graph
of B than A...
.
2 With the same amount resources , produce more ...

3 . F 'Uncertain !! The amount of resources of both countries aren't

given.

comparative advantage
*
output 'E , input -
& -

"'or' El

total output of all if each specializes in the

production
principle countries increase
country
:

of the good in which it has a lower

opportunity cost.

ToT determine from trade

: a
country's gain

and eg : X Y

trade
60
no 40

F
aft specialization O 110
? X- = To T

traded
sox-soi
50 go

*
Free trade ( small
economy
1 .
Tariff .
2 Quota
P($) P($)
1
S (domestic A
supply S (Domestic supply

L
.

51 +
Qq
# : tariff revenue

Pt=

Pw + t
Supply with tariff Pq
Pw 1/11/11 It SF
(supply with ( SF
free trade
Pu
-
Quota
(SupplywitThe
Q
D
> Q Q
Q2 Q4 Q , Q, Q2

*
*
The effectiveness The effect of
depends on
elasticity quota on
restricting imports
of demand . If D inelastic tariff will affects
is
,
is more certain as it directly
ineffective as ↑P lead smaller ↓ in
Qimport. the volume of imports .
 Macro 14
Exchange rate

. HKDT USDA
eg

A k MS
exports
:
When HKD price
appreciate against the USD ,
in

1 in USD & revenue in HKD Q revenue terms of USD of HK exports ↑ .

Volume ↓.

↑ ↓? X ↓ ↓
elasticity Revenue Th
...
-
.

reve import Q
or

~
@ in Use D revenue ...

price in terms of HKD of HK exports *

* TT ↓ ↑ ? ↑ in terms of USD +, volume ↓ revenue .

t

Balance of ( Current account net capital & financial (

payment + assets
=

0 in non-reserve

O current account
*

Component Eg Ms Remarks
.
(visible trade ** Qu balance
-goods Export/inport goods For all ,
and x

-services (invisible trade tourists all expenditure

[
from /paid
-primary income
DE wages profits , ,
interests ...
abroad +It

remittances donation (EEA)

-secondary income ,

② Capital & Financial Account

*

Component Eg Remarks
.
Capital transfer debt forgiveness ,
donation (A)

non-produced a non-financial assets

Copyrights Trademark Franchises Patents
·

, , ,

investment in real & financial assets shares house

,
buy car ,

*
+**7
change in reserve assets =
Bop
-

About X & M Special Qui

1 . X < / < My
surplus/deficit ( *** +
1) visible trade surplus ,
how current account deficit ?

2 .
↑ in X / tin M > 41 t* % -
when the balance of other items (E) in current account

GBEER !!!
.?? 4 in X ↑
altogether has deficit & the visible trade
3 > / ?? in Ma a the deficit >

surplus.
 Elective
Graph
Graph 1 (St .
line) 2 (curve

B's A: production & consumption pt

umption
production pt

iT' :
terms of trade

B production pt aft specialization

:

p aft trade pottin a

58
PPF
1 .

Why is st . line curve

of When
The cost
producing an extra production is
subject to increasing
of of Y slope of PPF increase
unit X in terms forgone is
marginal cost ,

always the same .

.
2
production pt :

A the domestic of
pt where
marginal cost is
equal to terms trade.

*
Pt out of PPF Country isn't its production
maximizing
=

3. Gain from trade :

& Y
It can consume
beyond it PPF ·
It can consume more of X after trade .

Double
productivity :

OC of of both & Y
production X remain
unchanged.
Increase labour force :

shift outwards & possibilities .

enjoy larger consumption
CPF it can
Pros & Cons of Globalisation

of scale . Most ↓ prices & ↑ choices for

v
enjoy economies to consumers

~ transfer & enhances the

promotes technology economic
growth
Workers of business &
X
may go out lost job .

Unemployment may increase.

& of
-Increase
pollution developed exhaustion natural resources in less countries .

* Human
Development Index (HDI) &
: measure economic
growth development
health life
:
expectancy at birth

education :
expected yrs
of
schooling
standard GNI secon
living growth
:

Gov'
policy ↑ HDI :

↑ which I education level

subsidy on tertiary education

↑ for of experts to I
quota immigration productivity .

living standard ↓ due to international trade :

Pollution which for environment &

problem become serious harm people
-

more

Income import .
distribution become more uneven as workers in substitute
industry suffer
unemployment
-