01:220:102 Lecture Notes - Lecture 21: Autarky, Economic Equilibrium, Comparative Advantage
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Document Summary
In the united states, imports have been greater than exports since 1980s. The importance of imports and exports to a country depends on the percentage of said country"s gdp. Gdp = consumption + investment + government spending + taxes + (exports - imports) Exports are a relatively low part of the us gdp(~12%) Absolute advantage: a country is the most efficient producer of that product. Comparative advantage: when a country can produce a product with a lower opportunity cost. Country with abundant supply of factor of production will have a comparative advantage of in goods whose production is intensive in that factor. Factors of production vary from product to product, resulting in countries having a comparative advantage in only some products. Differences in technology: some country has developed a particular technology that explains its comparative advantage. Increasing returns to scale: country gets more efficient as it grow will lead to afew large producers.