General equilibrium trade geometry: Pre-workshop preparation
You will be able to complete the Lab 1 exercises faster and more successfully if you
come to class already familiar with the computer program we will be using for Lab 1. To
try it out:
1. Go to any computer attached to Oxy's Novell network (such as the
library basement PCs or the PCs in Fowler 111 and 112).
2. From the main Windows screen, click on the "Economics"
icon.
3. In the Economics group, click on the "Econ.311" option.
4. From the Econ.311 menu, select option 1, "The general
equilibrium geometry of free trade"
To try out the program, change the various parameter values and then click the 'Draw' menu options to view the results.
You can use the program to investigate the consequences of changes in resource endowments, production requirements, technology, tastes, and global prices. You can change as many of the parameters as you wish, but you will probably learn more if you change just one value at a time to do a more controlled set of examples. Experiment at will; unlike QWiz Plus, the simulation programs for the course do not keep any permanent record of what you do or any mistakes you make.
The diagram is modeled with Cobb-Douglas production and utility functions. The
exponents for each function sum to one. The parameters have the following meanings:
Resource endowment variables:
Total capital
Total labor
Capital intensity variables (the exponent on capital in a CRTS
Cobb-Douglas production corresponds to capital costs as a share of total production
costs):
X's K-exponent
Y's K-exponent
Technology variables (scalars used to increase or decrease the output obtained from any
given set of inputs):
X's techno-boost
Y's techno-boost
Taste variable (the exponent on X in a Cobb-Douglas utility function):
X's budget share
Price variable (global relative price of X):
PX/PY