Trading and Gain Questions

[kathryn....@gmail.com]

Hey Folks! I wanted to ask about what we discussed yesterday in lass about trading and gaining. 

The example kind of threw me for a loop towards the end, but I sat with it today, thought it out and made a "how to set up trading" bullet list for me to remember (with class example embeded).

Do you guys think this is correct?

Trading

• Find PPF of both countries
• Germany – 15 computers 5 grain
•  Poland – 4 computers 4 grain
•  Find Opportunity Cost of both goods in both countries
• Germany – 1 Computer = 1/3 Grain (<-- Lowest)
• Germany – 1 Grain = 3 Comp
•  Poland – 1 Computer = 1 Comp
• Poland – 1 Grain = 1 Comp (<-- Lowest)
• Find Specialization of both goods in both countries
• Germany specializes in Computers
• Poland specializes in Grain
• Find #Good to consume for both countries
• Both need to consume 2 tons of grains
• Set up Without Trade chart
• Without trade Germany consumes 2 Grains and 9 Computers
• Without trade Poland consumes 2 Grains and 2 Computers
• Germany and Poland = 4 Grains and 11 Computers
• Set up Specialization + Trade chart
• With Trade Germany produces 0 Grains and 15 Computers
• With Trade Poland produces 4 Grains and 0 Computers
• Germany and Poland = 4 Grains and 15 Computers 
• Find point of specialization
• (4,15) 4 Grains and 15 Computers
• Joint PPF
• At top left of the graph – You need more of X. Who has more of X?
• Poland
• Point of Specialization coordinates
• At bottom right of the graph – You need more of Y. Who has more of Y?
• Germany

I hope this is correct!

Questions I have:

• It is not a straight line because there are different opportunity costs for both goods in both countries?
• What is the difference between this problem and the problem on page 34? They both have different opportunity costs, but the one on page 34 has a straight line. 
• Is anyone else kind of confused with the chart on page 34 compared with what we did in class? It seems different. 
• Page 8 of the handout - did you catch what she was saying after figuring out the specialization and trade of grain/computers... she wrote to the right of that - something to the degree of producing and selling. Do you have more information on that?

Thanks so much!

Katie