ECON 1000 Lecture Notes - Lecture 9: Infant Industry Argument, Deadweight Loss, Unfair Competition
16 Nov 2016
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Many of the goods consumed in canada are produced elsewhere. Assume no trade with rest of world (row) Three questions as consider opening up to trade: First step is to compare isoland price in row. Price prevailing in row called world price. Can use this to see if isoland has ca or not. Domestic price = opportunity cost textiles in isoland. World price < domestic price before trade can buy at lower opportunity cost on world market. World price > domestic price before trade can buy at higher opportunity cost on world market. If domestic price < world price, isoland has ca. If domestic price > world price, isoland does not have ca. Trade is based on ca and so . If domestic price < world price, isoland exports the good . If domestic price > world price, isoland imports the good. Assume isoland is a small economy relative to row. World price unaffected by isoland"s trade policy.
