International Trade by the Numbers: Comparative Advantage, Terms of Trade, Tariffs & Quotas

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Turn a two-country production table into opportunity costs for wheat and cloth and let formulas decide who has the absolute and who has the comparative advantage in each good.
• Compute what Norland and Sudoria produce on their own, shift their workers towards their comparative advantage and measure how much extra wheat and cloth the world gets.
• Find the range of wheat-for-cloth prices both countries would accept, test an agreed deal and split the gains between Norland and Sudoria.
• Solve linear domestic supply and demand for rice and apples, compare each autarky price with the world price and let formulas decide whether Norland imports or exports.
• Put a tariff on Norland's rice imports and measure the new price and imports, the loss to consumers, the gain to producers, the tariff revenue and the deadweight loss.
• Replace the tariff with an import quota, find the domestic price it creates and the equivalent tariff, value the quota rent and compare the national loss for three ways of handing out import licences.
• Build Norland's current account from goods, services and income flows, compute net exports and check the result against national saving minus investment.
• Derive trade weights for Norland's four partners, combine eight quarters of bilateral rates into a trade-weighted index with SUMPRODUCT, adjust it for relative prices and chart nominal against real.