GEOG 216 Lecture Notes - Lecture 11: Factor Endowment, Absolute Advantage, Comparative Advantage
17 Jan 2018
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Why do countries trade with one another: differences in factor endowments: Intra-industry or activities): increased trade in particular industries intra-firm trade (via globally integrated pdtion: relationship btw trade and geography: geo matters a lot. Where there are a lot of research and dvpt industries where there is good knowledge. Advantages and the gains from trade: differences in factor endowments. Countries will be advantages or relatively more efficient at the pdtion of certain goods based on those endowments that they have. Means also that other countries will be less efficient in other pdtion of goods and services. If differences -> specialization in pdtion where they are more efficient. Mutual gains from trade: countries will end up with a combination of goods that is better adapted to their preferences. Everyone become (cid:494)winner(cid:495) it has to be a mutual relationship positive gain. South has an absolute advantage in the pdtion of wine. North has an absolute advantage in the pdtion of bread.
