INDIVIDUAL ASSIGNMENT 3 – RESEARCH REPORT Finally, Thailand is the chosen country to analyze income disparity through Gini coefficient

INDIVIDUAL ASSIGNMENT 3 – RESEARCH
REPORT

Subject Name

International Trade

Subject Code

ECON1269

Lecturer

Pham Thi Bich Ngoc

Student Name

Le Ngoc Linh

Student ID

S3804772

Campus

Saigon

World Count

1993

Table of Contents
Question 1:........................................................................................................................2
A..................................................................................................................................................2
B..................................................................................................................................................3
C..................................................................................................................................................4
D..................................................................................................................................................4

Question 2:........................................................................................................................5
A..................................................................................................................................................5
B..................................................................................................................................................7
C..................................................................................................................................................7
D..................................................................................................................................................8

Question 3:........................................................................................................................8
References:........................................................................................................................9

1


The report will show the price, quantity, profit, consumer surplus and welfare loss that are
results of companies A, B and J in various cases. Furthermore, collect data and analyze it in
the pre-Covid and post-Covid period. Finally, Thailand is the chosen country to analyze
income disparity through Gini coefficient.

Question 1:
A.


Both companies Astra-PC and Be-U manufacture and sell laptops in Vietnam market

 Q = Qa + Qb
Have: Q = 20.000.000 – 5000P  P =

20.000 .000−Q
5000

=

20.000 .000−Qa−Qb
5000
Next:

TR A = P*Qa=

20.000 .000−Qa−Qb
5000

Qa

TRB = P*Qb=

20.000 .000−Qa−Qb
5000

Qb

And: MC a =


MC b = MR =

Change ∈ TR
Change ∈ Q

= 2500

TRa = 2500Qa

TRb = 2500Qb



The total profit of company A and B:

TPr a =

20.000 .000−Qa−Qb
5000

20.000 .000−2Qa−Qb
5000

Qa – 2500Qa

- 2500 = 0

20.000.000 – 2Qa – Qb = 12.500.000 (1)
TPr b =

20.000 .000−Qa−Qb

5000

20.000 .000−Qa−2Qb
5000

Qb – 2500Qb

- 2500 = 0

20.000.000 – Qa – 2Qb = 12.500.000 (2)
From (1) & (2)  Qa = Qb = 2.500.000 units
P = 3000


The profit of company A and B:

2


Pr a =

Pr b =

20.000 .000−Qa−Qb
5000

20.000 .000 −2.500.000−2.500 .000
5000


2.500.000 – 2500*2.500.000 = 1.250.000.000

When Q = 0  P = 4000

Consumer surplus =


Qa – 2500Qa =

1
2

(2.500.000*2)(4000 – 3000) = 2.500.000.000

In case of perfect competition: P = MC = 2500
 Q = 20.000.000 – (5000*2500) = 7.500.000 units


Welfare loss (compared to a free market) =

1
2

(7.500.000 – 2.500.000*2)

(3000-2500) = 625.000.000

B.


The total cost of J-Laps: TC = [1900 + (0.158*1900)]Q = 2200Q



Astra-PC, Be-U and J-Laps sell laptops in Vietnam
 Q = Qa + Qb + Qj



The total profit of company A, B and J:
TPr a =

20.000 .000−Qa−Qb−Qj
5000

20.000 .000−2Qa−Qb −Qj
5000

Qa – 2500Qa

- 2500 = 0

20.000.000 – 2Qa – Qb - Qj = 12.500.000 (1)
TPr b =

20.000 .000−Qa−Qb−Qj
5000

20.000 .000−Qa−2Qb −Qj
5000

Qb – 2500Qb

- 2500 = 0

20.000.000 – Qa – 2Qb – Qj = 12.500.000 (2)
TPr j =

20.000 .000−Qa−Qb−Qj
5000

20.000 .000−Qa−Qb−2 Qj
5000

Qj – 2200Qj

- 2200 = 0

20.000.000 – Qa – Qb – 2Qj = 11.001.000 (3)
From (1), (2) & (3)  Qa = Qb = 1.500.250 units, Qj = 2.999.250 units
P=

20.000 .000−(2∗1.500 .250)−2.999 .250
= 2.800,05
5000

3




The profit of company A, B and J:
Pr a =

Pr b =

20.000 .000−(2∗1.500 .250)−2.999 .250
5000

1.500.250 –

2500*1.500.250 = 450.150.120
Pr j =

20.000 .000−(2∗1.500 .250)−2.999 .250
5000

2.999.250 – 2200*2.999.250 =

1.799.699.962,5


Consumer surplus =

1
2

(1.500.250*2 + 2.999.250)(4000 – 2800) = 3.599.850.000

C.

In the case of the open market, the change in price swings downward from 3000 to 2800, the
number of products on the market is likewise on the increase to 2.999.250 units from
2.500.000 units and raise the consumer surplus from 2.500.000.000 to 3.599.850.000. Thus,
the opening up to trade will benefit consumers when they buy the goods at a lower cost as
well as a rise in the standard of living (OECD 1998).

D.


If Vietnam has not the tariff, the total cost of J-Laps: TC = 1900Q



The total profit of the company A, B and J:
TPr a =

20.000 .000−Qa−Qb−Qj
5000

20.00 0.000−2 Qa−Qb−Qj
5000

Qa – 2500Qa

- 2500 = 0

20.000.000 – 2Qa – Qb - Qj = 12.500.000 (1)
TPr b =

20.000 .000−Qa−Qb−Qj

5000

20.000 .000−Qa−2Qb −Qj
5000

Qb – 2500Qb

- 2500 = 0

20.000.000 – Qa – 2Qb – Qj = 12.500.000 (2)
TPr c =

20.000 .000−Qa−Qb−Qj
5000

20.000 .000−Qa−Qb−2 Qj
5000

Qj – 1900Qj

- 1900 = 0

20.000.000 – Qa – Qb – 2Qj = 9.500.000 (3)
¿ (1), (2) & (3)  Qa = Qb = 1.125.000 units, Qj = 4.125.000 units

4


P=


20.000 .000−(2∗1.125 .000)−4.125 .000
= 2725
5000

The profit of the company A, B and J:
Pr a = Pr b = 1.125.000*2725 – 1.125.000 – 2500 = 253.125.000

Pr j = (4.125.000*2725) – (1900*4.125.000) = 3.403.125.000
1
2



Consumer surplus =



When Vietnamese customs remove the tariff, the price and profit of company A and B

(1.125.000*2 + 4.125.000)(4000 – 2725) = 4.064.062.500

in the market will be decreased. However, the quantity and consumer surplus will
increase. Thus, J-Laps is the greatest winner compared to Astra-PC and Be-U that are
losers because the profit of Japanese company is higher than the profit of Vietnamese
companies in Vietnam market.

Question 2:
A.


The year previous to the Covid-19 pandemic: 2019



The year during the Covid-19 pandemic: 2020

Units: Billion USD

2019

2020

Electrical machinery and equipment

107

110

Footwear

21.8

17.2

Clothing, accessories (not knit or crochet)

16.1

13.3

Machinery and appliances

16.1

18.8

Knit or crochet clothing, accessories

15.4

13.7

Table 1: The main 5 export products

Units: Billion USD

2019

2020

Electrical machinery and equipment

73.7

95

Machinery and appliances

25.3

21

Mineral fuels including mineral oils

16

12.9

Plastics, plastic articles

14.8

15.9

Iron, steel

11.2

9.9

5


Table 2: The main 5 import products

Units: Billion USD

2019

2020

United States

63.7

77

China

40.3

48

Japan

21.2

19.2

South Korea

20.3

19.1

Germany

8.22

6.63

Table 3: Export value of the main 5 export partners

Units: Billion USD

2019

2020

China

91.1

84

South Korea

47.8

46

Japan

16.3

20

Thailand

11.8

10.9

Taiwan

11.4

16.7

Table 4: Import value of the main 5 import partners

2019

2020

19.96

19.34

Table 5: Vietnamese overall trade balance

2019

2020

Nominated exchange rate

23.155

23.15

CPI VN

102.8

103.22

Real exchange rate
22.92
Table 6: Real effective exchange rate for Vietnam

22.71

6


2019

2020

Income distribution

184.55

182.7

Poverty rate

4.8%

6.7%

Table 7: Income distribution and data on poverty for Vietnam
B.
In 2020, the export products such as footwear, clothing, accessories and the import products
such as machinery, fuels, iron and steel are reducted compared to the previous Covid-19.
Otherwise, the export volume in the electrical machinery, equipment and appliances raises in
the post pandemic. Besides, the import volume of plastics, electrical machinery and
equipment also increases in this period. For US and China markets, which are the high export
volume from 2019 to 2020 while the export value of Japan, South Korea and Germany is
declined. There is the developing of the import value to Japan and Taiwan markets but the
import value decreases to the markets of China, South Korea and Thailand in the post Covid19 pandemic. On the other hand, the trade balance and exchange rate of Vietnam tend to
reduce slightly after being hit by the Covid-19 pandemic. Meanwhile, the unemployment rate
rise sharply in the country due to the mass closure of businesses. Vietnam’s trade pattern is
affected strongly due to the difficulty in circulation of goods leading to an unprecedented
decrease in output that occurred in 2020 and the increase of taxes among huge enterprises
that causing product prices to fluctuate (OECD 2020).

C.
The Heckscher-Ohlin model is used to describe the trade movement of Vietnam market in the
Covid-19 pandemic. In the Heckscher-Ohlin model, countries export what they can most
efficiently and abundantly produce. This is perhaps the simplest model for predicting labormarket issues (McLaren 2012). According to the model, countries can also export things with
which it is well-endowed and import goods which it is poorly endowed (Baskaran, Blochl,
Bruck & Thesis 2011). When the covid epidemic broke out, businesses closed one after
another, leading to a high unemployment rate and localities having to social distance,
reducing productivity and supply in the market. The reason why some items have a decrease
in export volume, for example, footwear, clothes and accessories (Table 1). Because these are

7

non-essential products during the epidemic period and cause a decrease in export production
in Vietnam. However, the import volume of some products tends to increase because of the
high demand for essential products such as electrical machinery and equipment (Table 2).
The demand for electrical devices used to support households with electricity in many
different functions and especially to meet the conditions for students to study at home during
the lockdown city (OECD 2021). Therefore, the quantity of exports will decrease due to a
decrease in output, the quantity of imports will increase due to increased demand. Therefore,
the quantity of exports will decrease due to a decrease in output, the quantity of imports will
increase due to increased demand

D.
The essential industries that are considered very important during the outbreak of the Covid
pandemic are electrical machinery, equipment and food. According to Tables 1 and 2,
electrical machinery and equipment are at the top of both exports and imports in Vietnam.
This shows the high demand of users in Vietnam and around the world. The reason why
electrical machinery and equipment has become an essential industry during the pandemic is
because all offline activities such as exchanges, meetings or large gatherings are limited to
the maximum, so all activities will switch to online and remote management to avoid contact.
Therefore, if the epidemic is still not under control, the demand for electrical equipment will
continue to increase in the near future (PwC n.d). However, industries that are considered
non-essential such as footwear, clothing and accessories have been significantly reduced in
Vietnam during the Covid-19 epidemic. The reason is that they are non-essential items during
the pandemic compared to the electrical, food and medicine items that are must-haves to take
care of yourself and the family at home. Footwear, clothing and accessories industry will
develop as a new normal operating state is established in Vietnam and the world (ILO 2020).

Question 3:
One ASEAN country is chosen which is Thailand. Income disparity is the uneven distribution

of income across a population. As the income distribution becomes more unequal, so does the
income disparity. With a measure like the Gini coefficient, can be used to measure a
population's level of income disparity (Cowell 2011). During the past 20 years, Thailand has
experienced a huge change in income disparity (WorldBank n.d). Specifically, in the year

8


2000 the Gini coefficient reached a very high level of 42.8 indicating a deep strain of
inequality between rich and poor. In contrast, after nearly 2 decades, the Gini coefficient has
dropped sharply to 36.4 in 2018. However, Thailand is still in the top 4 with income disparity
in ASEAN after the Philippines, Malaysia and Indonesia but Thailand's wealth disparity has
narrowed over time, with the GINI index falling to 36.4 in 2018 from 39.4 in 2010 (Anuk &
Manop 2020). Besides international trade, growing openness in developing countries
increases income inequality through altering asset, spatial, and gender inequalities.
Additionally, he points out that most time-series analyses have found that increasing
openness has raised the demand for labors (Anderson 2005). For Thailand, the country has a
competitive advantage of having an abundant and low-cost unskilled labor force that can be
hired by businesses or shop owners with low fees. This has created many job opportunities
for the poor, young, old or those without qualifications to help them earn money to escape
poverty and develop their lives (ILO 2013). It also helps to close the gap between rich and
poor and income disparity in Thailand. Thailand has achieved significant progress in
economic and social growth during the previous four decades, rising from a low-income to a
middle-income country in under a generation. As a result of its continuous high development
and remarkable poverty reduction, Thailand has become a commonly referenced development
success story. Thailand's economy increased at an average rate each year. This expansion
resulted in the creation of millions of employment, which assisted in the emancipation of
millions of people from poverty (WorldBank 2021). The country also has some of the top
exports in the world, such as rice. As output increases, productivity increases, so does the
labor force, incomes increase, and poverty rates decrease. Hence, this short article shows that

international trade can reduce trade disparities in Thailand.

References:
Anderson, E 2005, ‘Openness and inequality in developing countries: A review of theory and
recent evidence’, World Development, vol. 33, no. 7, pp. 1045-1063, viewed 5 September
2021, Elsevier SD Freedom Collection database.

Anuk, S & Manop, U 2020, Thailand Economic Focus: Building a more equal and
sustainable Thailand after COVID-19: A UN perspective, United Nations Thailand, viewed 7

9


September 2021, < />
Baskaran, T, Blochl, F, Bruck, T & Thesis, F-J 2011, ‘The Heckscher-Ohlin model and the
network structure of international trade’, International Review of Economics & Finance, vol.
20, no. 2, pp.135-145, viewed 4 September 2021, Elsevier SD Freedom Collection database.

Cowell, D-F 2011, Measuring Inequality, Oxford, ProQuess Ebook Central database.
EOC

n.d,

‘Vietnam’,

EOC,

viewed

4

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2021,

<ld/en/profile/country/vnm?depthSelector1=HS2Depth>.
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Organization, Switzerland.
McLaren, J 2012, International Trade, 1st Edition, Wiley, ProQuest Ebook Central database.

OEC

n.d,

Vietnam,

OEC,

viewed

1

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2021,

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2021,

< />
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10


PwC n.d, Analysis of the Potential Impacts of COVID-19 on Vietnamese Economy, company
report,

PwC,

viewed

6

September

2021,

< />Trend Economy 2021, ‘Vietnam/ Import and Export/ World/ All Commodities/ Value (US$)
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