ECS3702 Assignment 3 Semester 1 2023

ECS3702 Assignment 3 Semester % TRUSTED workings, explanations and solutions. For assistance call or us on . QUESTION 1 Discuss the potential trade effects and subsequent channels through which the covid-19 pandemic has affected a developing economy such as South Africa. [5 marks] QUESTION 2 Explain briefly In your own words why international trade is important for a developing country. [10 marks] 2 3 QUESTION 3 Consider the following hypothetical scenario of two countries, Togo and Mali. Table 1: Output per worker hour Output Togo Mali Cheese (ton/hr) 20 10 Aircrafts (Units/hr) 60 20 (i) State the products of absolute advantage and absolute disadvantage for both countries. You must explain how you arrived at your answer. [5 marks] (ii) Determine comparative advantage and comparative disadvantage for both nations, for both goods. You must show your calculations and draw a conclusion based on your calculations. Marks will not be awarded if workings are not shown. [6 marks] 4 (iii) From your answer in (i) and (ii) above, explain whether trade is possible and the pattern of trade according to the classical theories. [6 marks] 5 Use the hypothetical scenario below to answer the questions that follow Output Togo Mali Cheese (ton/hr) 60 10 Aircrafts (Units/hr) 40 20 (iv) If Togo exchanges 60C for 60A with Mali, (a) How much does Togo gain in terms of aircrafts? And how many hours does Togo save. Explain [2 marks] (b) How much does Mali gain in terms of aircrafts? Explain [3 marks] 6 (c) What is the range of mutually beneficial trade? Explain how you arrived at your answer [4 marks] QUESTION 4 Nigeria is a labour abundant nation and Japan is a capital abundant nation, producing and consuming palm oil and computers, using both labour and capital. Palm oil is labour intensive. Both nations experience increasing costs in their production. Explain the basis of and gains from trade for both countries using well drawn diagrams. [15 marks] 7 QUESTION 5 Palm oil is produced and consumed in Nigeria. The autarky price of palm oil is N100, Nigeria producers of palm oil produce 500 tons of palm oil and consumers consume 500 tons of palm oil. The free trade price of palm oil is N20. To protect domestic production and jobs, the Nigerian government imposes a 20 percent ad-valorem tariff on imported palm oil. Using partial equilibrium analysis and a well-drawn diagram, explain the impact of this policy decision. [10 marks] 8 9 QUESTION 6 (i) Compute the total consumer surplus in the absence of the tariff. [3 marks] (ii) Compute the consumer surplus after the tariff. [3 marks] 10 (iii) Compute the producer surplus [3 marks] QUESTION 7 Assume South Africa imports cement from Nigeria and Ghana at the free trade prices of R30 and R20 per ton of cement respectively. In autarky, South Africa’s domestic price of cement is R70 and 40 tons of cement are produced and consumed per annum. Use this information, and with the aid of a diagram, explain the concept of trade diversion. [10 marks] 11 NB:Your explanation must touch on the pre tariff, 100 percent tariff and the formation of customs union conditions that prevail. You must also use your own quantities on the horizontal axis. 12 QUESTION 8 It is widely acknowledged that South Africa is one of the top destinations for MNC’s activities on the continent. Discuss (i) the factors that make South Africa an attractive prospect for foreign investors, (ii) factors that may dissuade investors and (iii) the advantages and disadvantages to South Africa of such investments. NB: This question is not a broad question on FDI. It is specific to the South African context. Your discussion must therefore highlight these issues as they pertain to South Africa. [15 marks]