ECON 3HH3 Chapter Notes - Chapter 2: Real Wages, Wage Labour, Autarky
11 Oct 2017
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Reasons for trade: proximity, resources, technology, outsourcing and offshoring. The closer the countries are, the less cost for transportation, so neighbouring countries become major trading partners. Sometimes they enter free-trade areas: no restrictions on trade. Canada and us; european country and another european; japan and china as large trading partners. The local production (and expertise) of a good, as a result of a high demand due to culture or climate (snowboards in. Canada), they are able to produce more, higher quality and at a lower cost, than another country. Geography includes natural resources (land and minerals), labour resources (education and skill) and capital (machines and structures) = factors of production. Absolute advantage- country has the best technology for the production of a good = best at producing the good. Germany and netherlands don"t have natural resources to produce snowboards but thy are known to produce high-quality manufactured products, as reflected by their high price.
