ECO203e : Country C imports 80,000 Metric Tons of Steel from Country U and Produces Domestically 80,000 Metric Tons Per Year: International Economics Assignment, SUSS, Singapore

Question 1
Country C imports 80,000 metric tons of steel from Country U and produces domestically 80,000 metric tons per year. The world price of steel is $500 per metric ton. Assuming linear schedules, research analysts estimated the price elasticity of domestic supply to be 0.50 and the price elasticity of domestic demand to be -0.25 in the current market equilibrium. Country C imposes an import duty of $150 per metric ton that caused the world price to fall by 10%.

(a) Summarise and analyze the quantity of steel produced, consumed, and imported in Country C. Analyse and discuss the welfare gain from trade in Country C. Show your answers to the steel market with a proper diagram.

(b) Analyse the effects of the consumer surplus, producer surplus, government revenue, and deadweight loss in the Country C steel market with the tariff. What are the terms of trade of the Country C steel market after the tariff was imposed? Explain the welfare effects of both countries.

Question 2
In the H-O model, a country that exports one product and imports a different product is called inter-industry trade. Although there is substantial inter-industry trade in the world, Intra-industry trade is also important today. Interpret what intra-industry trade is and demonstrate it with a product with two (2) trading countries and show how they can benefit from it.

Question 3
Explain how changes in the national income of Country A can lead to a repercussion effect of its trading partner, Country B, of its balance of payment. Illustrate and explain it with a numerical example with a foreign trade multiplier of 0.4.

Question 4
(a) Singapore is a highly trade-dependent economy operating under a managed float exchange rate system. For over a decade it has been experiencing near full employment and has had a current trade surplus position. Due to a pandemic that resulted in a financial crisis, the major trading partners of Singapore have experienced severe economic recession and have reduced their imports from Singapore.

Analyze and explain the effects of the trading partner’s recession on Singapore. Your discussion should include the exports, imports, money supply, and international financial flows as well as a suitable foreign exchange market diagram.

(b) Malaysia is an oil producer and its budget is highly dependent on its oil revenues other than on tax revenues. Prices of crude oil in early Oct 2018 were about US$74/barrel and in early Jan 2020, they were just above US$60/barrel. By mid-April 2020, however, they were about US$16/barrel.

Analyze the effects of the drastic drop in oil prices on Malaysia’s current account, financial account, and the overall balance of payments. If Malaysia were to operate under a fixed exchange rate system (with US dollars), discuss how the system operates and explain how a fixed exchange rate will affect its foreign reserves.

SECTION B (Total 25 marks)
Prepare a video recording of the presentation on Question 2 of at least 3 minutes but not exceeding 6 minutes. There are two methods for ECA video assignment submission; either Record Media or Upload Media. For Upload Media, please note that your file size should be no more than 500MB and the format is in .mp4.

SECTION C
Prepare a set of PowerPoint presentations upon which the video presentation is based. Please note that the PowerPoint must be converted to PDF before submission to Canvas.