POLI 243 Lecture Notes - Comparative Advantage, In Country

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The wealth of nations: different people have different capacities to produce and to increase aggregate output, specialization is required. Efficiency an actor"s ability to produce a good or service more efficiently than another actor"s ability to do so. If a country concentrates their resources to producing the good that they have a comparative advantage in, the aggregate world output for that good will rise. In country a, 1 unit of wine costs 2 units of textiles. Country b, 1 unit of wine costs 1/3 unit of textiles. What you are good at depends on what you have. Canada has a lot of land, can produce wheat. Base on endowments of the factors of production. Buying cars from japan rather than those made from canada. Factors that are not captured by the model. Apple is getting ipods assembled in china, created by another country, shipping it to different factories. Relating factor flows, investment decisions, and monetary policy to trade.

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