MGEA02H3 Lecture Notes - Lecture 23: Vacuum Cleaner, Diminishing Returns, Absolute Advantage
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MGEA02H3 Full Course Notes
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Lecture 23, the final lecture will cover chapter 8 of the microeconomics textbook. Trade is the exchange of products between countries. When conditions are right, trade brings benefits to all countries involved and can be a powerful driver for sustained gross domestic product, or gdp, growth and rising living standards. E(cid:373)e(cid:373)(cid:271)er fro(cid:373) mo(cid:374)da(cid:455)(cid:859)s le(cid:272)ture, o(cid:374)e (cid:373)ai(cid:374) (cid:449)a(cid:455) gross do(cid:373)esti(cid:272) produ(cid:272)t is (cid:272)al(cid:272)ulated is as the following. Adds up expenditure on domestically-produced final goods and services by approach households, firms, governments, and foreign buyers. Co(cid:373)parati(cid:448)e ad(cid:448)a(cid:374)tage e(cid:454)ists (cid:449)he(cid:374) a (cid:272)ou(cid:374)tr(cid:455) has a (cid:858)(cid:373)argi(cid:374) of superiorit(cid:455)(cid:859) i(cid:374) the supply of a good or service, like where the marginal cost of production is lower. Countries will generally specialize in and export products which use intensively the factors inputs which they are most abundantly endowed. If each country specializes, total output can be increased leading to better allocative efficiency and welfare.