Econ week six notes
Econ week six notes Econ 150-21
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This 1 page Class Notes was uploaded by Olivia Notetaker on Sunday February 28, 2016. The Class Notes belongs to Econ 150-21 at La Salle University taught by Dr. Mshomba in Fall 2016. Since its upload, it has received 34 views. For similar materials see Intro Macroeconomics in Economcs at La Salle University.
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Date Created: 02/28/16
Econ notes week 6 th February 23 and 25 - If one country has comparative advantage in one, the other country HAS to have comparative advantage in the other o One country can have absolute advantage in both - With US being 1B = 2C and Mexico being 1B = 4C, US will have to be paid at least 2C for 1B and at most 4C - Higher the opportunity cost is, the higher the price of making that product o They’d be unable to compete - Terms of trade- the price of exports relative to the price of imports o It is not an average o If 1B = 4.2C, it can’t be because mexico won’t accept it (or 1B = 1.75C, US won’t accept) - Trade helps a country consume outside its production possibilities curve - Can’t produce outside production possibilities line without more resources or better technology - Without trade, ppline is also consumption possibilities line - Countries very rarely completely specialize in just what they’re good at because you don’t want to rely on another and others might not be able to make enough - Countries produce goods they don’t have comparative advantage because countries may not be able to make enough for the trade - Terms of trade are always changing o An improvement in tot does not always imply that country is better off o The improvement may have happened befcasue the supply has gone down Or maybe cost of C has decreased so they can afford to sell it at a lower price with the deterioration not always being bad - We have trade barriers because we need to protect smaller countries from bigger and other nations o The infant protection argument. Problem= what if country never matures? Also, all trade barriers are supposed to be temporary- so what if the barrier persists?
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