Lesson Plan - International Trade

I. Trade Barriers

- definitions

- tariff = a tax on imported goods

- quota = an explicit limit on the quantity of imports

- Demand and supply analysis of a tariff

- what happens to the domestic market when a tariff is imposed?

- impact of a tax on the market (see elasticity material)

- what happens to the foreign market when a tariff is imposed?

- residual demand

- who gains and who loses from a tariff?

- Demand and supply analysis of a quota

- what happens to the domestic market when a quota is imposed?

- what happens to the foreign market when a quota is imposed?

- who gains and who loses from a quota?

II. Exchange Rates

- definition = the price of one currency (say norwegian crowns) in terms of another currency (say US dollars)

- crown price of $

- $ price of crowns

- when does a currency appreciate?

- when does a currency depreciate?

- Demand for foreign exchange (i.e., foreign money)

- Why Demand foreign exchange?

- Why is Demand downward sloping?

- Why does Demand shift?

- Supply of foreign exchange

- Why Supply foreign exchange?

- Why is Supply upward sloping?

- Why does Supply shift?

- equilibrium exchange rates