ECON 2023 Lecture Notes - Lecture 20: Opportunity Cost, Absolute Advantage, International Trade
8 Dec 2016
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Document Summary
The economic basis for trade: 3 underlying facts that trade is bene cial, 1. ) Distribution of natural, human & capital resources among nations= uneven. Nations differ in endowments of economic resources: 2. ) Ef cient production of various goods require different technologies. Not all nations have same level of technological expertise: 3. ) Products= differentiated as to quality & other attributes. Some people prefer certain goods imported (than domestically produced: resource intensities, labor-intensive goods. Goods require a lot of labor to be produced. E. g. ) textiles, electronics, apparel, toys, sporting goods etc: land-intensive goods. Goods require huge land to be produced. Soil, tropical climate, rain fall, supply of unskilled labor. > ef cient, low-cast production of vegetables: [united states] [germany] Airplanes, automobiles, agricultural equipment, machinery, chemicals: special qualities. Nation can develop individual products in demand worldwide: e. g. ) Fashion (italy), chocolate (belgium), software (u. s. ), watches (switzerland: distribution of resources, technology, product distinctiveness. But change over time=> ef ciency & success of nation also changes.
