16466 Chapter Notes - Chapter 18: Protectionism, Absolute Advantage, Exchange Rate
Document Summary
Economics for today:international trade and finance chapter 18. Why nations benefit from trade: trade allows a country to consume goods & services in excess of its production possibilities frontier (ppf). Specialisation without trade: the table below shows that the total two-country world output is 90 tonnes of agricultural products and 30 tonnes of electronic equipment. Specialisation with trade: specialisation allows both countries to gain from trade, australia produces 100 tonnes of agriculture and imports 20 tonnes of electronics in exchange for 30 tonnes of agricultural product. In summary, international trade allows a country to consume a combination of goods that lies outside its production possibilities frontier. Comparative advantage and absolute advantage: comparative advantage is the ability of a country to produce a good at a lower opportunity cost than another country. Comparative advantage: for australia, the opportunity cost of producing 50 tonnes of electronic equipment is.
