ECON 1116 Study Guide - Midterm Guide: Autarky, Comparative Advantage, Free Trade
Document Summary
Autarky: when a country does not engage in trade. Terms of trade: the ratio of exports to imports. Free trade: unrestricted exchange of goods and services. In the absence of government intervention, this maximizes surpluses. Not all goods and services can be traded (e. g. medical) Tastes are different (some products have no demand abroad) Wto: oversees trade agreements, pushes for trade liberalization, and settles disputes. Globalization: increasing openness to trade and investment globally. Anti-globalization because: loss of culture, resource exploitation, power to mncs. Protectionism: use trade barriers to protect local industries, jobs, and safety. Dumping: selling at prices lower than production costs. The usa gains surplus by removing trade barriers even if other nations don"t. Other barriers to trade are: health and safety regulations. Price elasticity: change in demand as a result of price change. Price elasticity of demand: % change in demand / % change in price (or income)
