Economics 101: International Trade Theories and Applications

This assignment solution analyzes various international trade theories and models through several case studies. It begins by applying the absolute advantage theory to the trade potential between Ukraine and Japan, focusing on barley production. The solution then utilizes Porter's Diamond Model to assess Apple's competitive advantage in the global market, particularly in relation to labor costs and market demand. The document further explores the labor-intensive nature of industries, comparing Singapore and the Philippines, and employs Leontief's paradox to evaluate capital and labor intensity in exports. Additionally, the solution applies comparative advantage theory to determine trade patterns between Australia and Brazil, and analyzes the network model of internationalization using the example of Greek firms. The assignment also references external resources like toolshero.com for further analysis of Porter's Diamond Model and identifies the growth stage of a product based on market dynamics. Finally, it utilizes unit labor requirements to determine the competitive advantages of Zambia and Turkmenistan, applying the theory of comparative advantage to explain their trade relationship.

Assignment

7) As per absolute advantage theory, when one country has enough stock to meet supply and
demand of a particular commodity, while another one faces difficulties in same. Then there is a
possibility of trade between them where both countries can gain benefit. In context with Ukraine
and Japan, where output per worker for Barley fails to meet demand of market, therefore, by
trading, Japan can meets its supply as per demand of Barley. While Ukraine gain benefits by
exporting its commodity.
10) Using Porter's Diamond Model, Apple Company gains benefits in earning a high competitive
advantages, in terms of labour. Although this firm is headquartered in US, but to gain cheap
labour costs as factor conditions, it carries out the major operations mainly in foreign countries
like China, UK, Singapore, India and more, where wages of labour relatively low. Similarly, in
these foreign markets, demand of innovative and high technology gadgets give advantage to
Apple in increase its sales and generate high revenue, by giving a tough competition to other
electronic firms.
11-a) As labour intensive industries mainly determined in terms of capital required to produce
goods and services. Therefore, it has been analysed that Singapore as compared to Philippines,
tend to be the larger importer of labour intensive, therefore, it is more likely to capital-intensive
than Philippines (https://www.econstor.eu/obitstream/10419/31428/1/366454218.pdf). Similarly,
Philippines is more likely to export labour-intensive products than Singapore
(https://www.straitstimes.com/singapore/manpower/economy-needs-to-become-less-labour-
intensive).
11-b) In order to evaluate with country is more likely to export capital-intensive products and
export labour-intensive products, Leontief's paradox is used as a economical theory. As per this
theory, a country having higher capital per worker, will counted as lower capital ratio in export.
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16)
Output Per worker Country
Australia Brazil
Goods Sleds 300 200
Clarinets 2 1
a) Using all its resources, it has seen that Australia can produce 2 clarinets and Brazil can
produce 1, as summarised in above table. So, under this case, Australia has absolute advantage in
production of clarinets.
Clarinets produced by Australia in terms of output per worker is 2 and,
Clarinets produced by Brazil in terms of output per worker is 1, which is ½ of production of
Australia. Therefore, Australia has more competitive advantage factor.
b) It has seen that Australia produces 300 sleds per worker, while Brazil as 200.
Therefore, it has calculated that Australia has 3/2 times, production rate of Brazil
So, Australia hereby, also gets advantage factor in production of Sleds also.
c) As per theory of Comparative Advantage Theory,
opportunity cost of Australia = 300/2 = 150
while, opportunity cost of Sleds = 200/1 = 200
Similarly, opportunity cost of clarinets = 0.006
While, opportunity cost of clarinets = 0.005
therefore, Australia has competitive advantage in production of Sleds,
but, both countries are in state of fulfilment of supply and demand of marketplace, for both
productions. Thus, there is no requirement of trading in both countries for these commodities.
17. a & b) Network model of internationalisation, fits with the strategy that Greek firms uses to
expand business in foreign countries. This model defines the process of business
internationalisation for establishment, maintenance as well as development of relations with
foreign countries. In context with present case scenario, Delta who is partner of DANONE
invested in Balkan countries, India and China, are considered as most developed destinations.
Therefore, it can be said that network model on internationalisation has used by Delta, for
investment.
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35). Patty Mulder available on https://www.toolshero.com/strategy/porter-diamond-model/
describes the Structure, Strategy and Rivalry, with relating and supported industries like Swiss
Watch Industry and Hollywood film industry.
38). As copycat item of ‘Product X’ is flooding in another country, after invention of same
product one year before, therefore, it shows that ‘X’ is on growth stage.
39).
Unit labour requirement Country
Zambia Turkmenistan
Goods Cotton 3 8
Steel 2 1
a) unit labour requirements of cotton by Zamnia is 3, where as Turkmenistan’s production of
cotton is 8, which is 8/3 times greater than Zamnia. Therefore, Zamnia has more competitive
advantage.
b) unit labour requirement of steel by Zamnia is 2, where as Turkmenistan’s production of cotton
is 1. Therefore, Turkmenistan has more competitive advantage than Zamnia as per comparative
advance theory.
c) As Turkmenistan is facing less labour intensive condition, where labours take more wages as
compared to Zamania. In this regard, to meet labour requirement, as per Theory of Competitive
Advantage, both countries are engaging with each other.
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