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Global Markets in Action

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University of Guelph
ECON 1050

Lecture 10 and 11 ECON1050 Page 1 MICROECONOMICS Global Markets in Action Focus international tradeeffect of globalization GLOBAL MARKETS Introductioninternational trade allows us to buy and consume goods that we cannot produceimports goods and services that we buy from people in other countriesexports goods and services that we sell to people in other countriesglobal trade today is enormous and has grown exponentially in the last 20 yearsDriving Forces of International Tradecomparative advantage divergent opportunity cost between countries o fundamental force that generates trade between nationsnational comparative advantage ability of a nation to perform an activity or produce a good or service at a lower opportunity cost than any other nation CASE STUDY Canada vs China o Canada has a comparative advantage producing regional jetsrequires technological knowhowwe have the human capital engineers researchers o China has a comparative advantage producing Tshirts o both countries can reap gains from trade by specializing in the production of the good at which they have a comparative advantage and then trading o Note the fact that Canada has a comparative advantage in jets today does not mean that China cannot develop a comparative advantage over time
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