POLISCI 359 Lecture Notes - Lecture 5: Trade Barrier, Absolute Advantage, Comparative Advantage
1 Feb 2016
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Absolute advantage: a country has an absolute advantage in producing a good if production of the good absorbs fewer resources than are required in other countries or by other individuals or firms: adam smith. Comparative advantage: a country has a comparative advantage in producing or selling a good if they experience the lowest opportunity cost in producing the good: david ricardo, all potential trading partners can gain enormously through. Ipe scholars see international trade differently appropriate specialization and exchange: law of comparative advantage: a person or a nation should specialize in the good they can produce at the lowest opportunity cost. How do negotiations or international institutions that govern trade, like the world trade organization, actually work: to understand why trade is political we need to understand how restricting trade redistributes wealth. Trade barriers redistribute wealth, and in an uneven and lopsided way: trade barriers benefit some producers (very direct benefits, trade barriers hurt consumers (very diffuse costs)
