ACCT 3224 Lecture Notes - Lecture 1: Autarchism, Indifference Curve, Comparative Advantage
Document Summary
Classical international trade theory: ricardian comparative advantage. Explains why economists think trade is good: heckscher-ohlin theorem. Explains why countries produce and export the goods they do: stopler-samuelson theorem. Explains why people in poor countries tend to be more favorable to trade than people in rich countries. Hint: free trade permits such a movement. 2 s n o i l l i m s t r i h. It efficiently utilizes nation"s resources and maximizes consumer happiness. Autarchy: china"s ppf has a much steeper slope than the u. s. , indicating that the opportunity cost of a computer is much higher in china. China must forgo 20 shirts to produce another computer (400/20=20): ech = optimal production and consumption, where slopes of uc and ppf are equal (tangent) China and exports 25m computers to china: with trade, consumption in the u. s. moves to cus at this higher indifference curve, u. s. consumes more of both goods.
