ECON 423 Lecture Notes - Lecture 6: Free Trade, Comparative Advantage, League1 Ontario
Document Summary
Mathematics: rs: qcloth/qfood, world: quantities/quantities, rsworld is weighted supply of the home and foreign relative supplies. Wage income will go down by the red area: before, the wage and price was higher, after trade, country export more cloth, employ more labour, mpl goes down in real terms, wage goes down, capitalists gain income. Gains from trade: free up trade will benefit some and harm others, 4-11: summarized in diagram. If gainer can compensate the loser, then they can both be better off. If winner from free up of trade willing to compensate loser, can both be better off. If gainer can compensate loser, everyone can be better off rather than staying at 2. International migration: mexico: more unskilled workers than america, see figure 4. 13. Figure 4. 13: problem 5: calculate numbers from model, 0: origin of home country, 0*: origin of us (foreign, mexico originally has l1 units (population of mexico, us labour at l1, originally too (smaller amount)