::Short Course in Global Trade Analysis :: Self-Evaluation
Here are a few typical questions taken from the weekly study guides provided in this course. Can you answer
these questions?
Module 2
What is tradable market clearing equation? What does it imply?
What is the difference between the market clearing conditions for mobile and sluggish endowments?
When the solution shows that "walraslack" = 0, what does this result imply?
How do you calculate the "power of the intervention" in the output market?
Module 3
What does the separability assumption imply in terms of the optimal mix of land, labor, capital, and
the elasticity of substitution between primary factors and intermediates?
Write out the linearized input demand equation and identify the expansion and the substitution
components.
What are the general and particular restrictions on the Allen partial elasticities of substitution?
What are the implications of these restrictions for CGE modeling?
Module 4
What are the main advantages and disadvantages of modeling final demand with a single regional
household?
What are the advantages associated with using the utility maximizing approach in explaining consumer
demand?
What are the three general restrictions implied by utility maximization on the part of private
households? Why are they important?
Is the CDE functional form more or less general than the CES? What particular restrictions on the
elasticities of substitution are imposed by the CDE functional form?
Module 5
What are the two factors determining a given sector's PE supply response to a change in output price
in a CGE model with constant returns to scale?
What would the PE Supply curve look like when all inputs are perfectly mobile across sectors and input
prices are exogenously determined (fixed)?
How are the sluggish inputs distributed across sectors? What is the relevant functional form?
What is the expression for partial equilibrium supply response as a function of model parameters when
one factor exhibits imperfect (sluggish) factor mobility?
Module 6
What does Dalton's Law state in terms of the burden of tax?
If supply is perfectly inelastic (or demand is perfectly elastic) who is going to benefit from a
subsidy, consumers or producers? What about when supply is perfectly elastic (or demand is perfectly
inelastic)?
What do we mean by a "closure"? What is a PE closure as opposed to a GE closure?
What does Walras Law tell us in terms of the relationship between equilibrium in other markets and
equilibrium in Investment-Savings market? Why is it the case that the latter market clearing equation is
not specified in the model?
Module 7
What is the Equivalent Variation? What question do we ask about the consumer to compute the EV?
Elaborate on what we mean by "welfare decomposition"?
What are the major sources for a given change in regional welfare? Which one(s) are relevant for open
economies? Which one(s) are relevant for closed economies?
Can you think of some examples of allocative efficiency effect?
