ECON 142 Week 7 Notes!
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This 2 page Class Notes was uploaded by Noah Johnston on Thursday October 6, 2016. The Class Notes belongs to Econ 142 at Kansas taught by Dr. Brian Staihr in Fall 2016. Since its upload, it has received 10 views. For similar materials see Microeconomics in Economics at Kansas.
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Date Created: 10/06/16
ECON 142 Week 7 Chapters 2 and 9: International Trade and Comparative Advantage US Trade Statistics US exports to other countries in ’15: 2.23 trillion US imported: 2.761 trillion This is a trade deficit. Both of these numbers are growing, which means we are becoming more globalized. Who we import from: Who we sell to: 1. China 482B 1. Canada 280B 2. Canada 295B 2. Mexico 236B 3. Mexico 294B 3. China 116B 4. European Union 426B 4. European Union 273B PPF: Production Possibilities Frontier (PPC=Production Possibilities Curve) A picture of all possible combos of output that can be produced using all of your inputs and using them efficiently. Opportunity Cost: The value of the thing you didn’t do. When PPF is shaped like a bow, opportunity costs change depending on where you are on the curve. GAINS FROM TRADE: Specialize in the thing you do best, than trade… Both countries end up better off than they would be on their own. Trade is NOT a "zero sum game”! REMEMBER: Any point to the right of a country’s PPF is a combo this country could not do by themselves. So it represents “having more”. Terms of Trade: How many of one for how many of another. 1 coconut for 3 bananas is the same thing as 1 banana for 1/3 of a coconut COMPARATIVE ADVANTAGE: A country has a comparative advantage in the thing where the opportunity cost is lowest. The country should export that thing in which it has a comparative advantage. Calculating Opp Cost: Russia can produce 16 wheat OR 8 oil. If Russia is producing 1 wheat it’s not producing 1/2 oil. Albania is producing 3 wheat and 6 oil If Albania is producing 1 wheat it’s not producing 2 oil. Russia has the lowest opportunity cost when producing wheat. Albania has lowest opportunity cost when producing oil. Country A makes 10 corn OR 15 soybeans Country B makes 8 corn OR 13 soybeans AND Country A makes 1 corn or 1.5 soybeans Country B makes 1 or 1.625 soybeans Country A has the comparative advantage in producing corn, so A should export corn.
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