ECO100Y1 Lecture Notes - Textile Industry, Trade Route, Trade Barrier
Document Summary
Outline: the gains from trade: individuals (omit see micro) - consume outside ppf: the gains from trade: nations. - winners and losers: (weak) arguments against trade, tariffs; - two ways of expressing ppf: production possibilities (per week) Opportunity cost of producing one unit of : Overall gain: with trade, a country can consume outside its ppf by specializing in the production of goods in which it has a comparative advantage. A: look at which goods the country is importing and exporting. Domestic price < world price country has a comparative advantage and will export good; Domestic price > world price country does not have a comparative advantage and will import good; (remember: in perfect competition, prices reflect costs of production (p=atc) ) Internationally traded goods with low transportation costs must sell at same price in all countries. Domestic price < world price indicates low opportunity cost of producing domestic good. Case 1: canada has c. a. in producing wheat.
