ECO 1104 Lecture Notes - Autarky, Absolute Advantage, Comparative Advantage
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ECO 1104 Full Course Notes
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Chapter 3 independence and the gains from the trade (difficult!!) Parting words of alan greenspan, former chairman of the fed. Anti-thesis: the robinson crusoe economy of total self-sufficiency, which is called. By specialization and trade, the total amount of production available for consumption is far higher that it is in autarky. Each economic unit should specialize in the production of the good in which they have a comparative advantage. Trade for the good in which they do not have it. Import the goods which you do not have the comparative advantage, and export the goods which you do have the comparative advantage. As in the textbook, there are two producers, the farmer and the rancher, and two goods, meat and potatoes. Rancher has a comparative advantage in the production of meat if the gap between how well she produces meat compared to how well she produces potatoes is greater than this same gap is for farmer.