Economics 1022A/B Chapter Notes - Chapter 31: World Trade Organization, Opportunity Cost, Comparative Advantage

• School: Western University
• Department: Economics
• Course: Economics 1022A/B
• Professor: Bruce Hammond

Document Summary

National comparative advantage:exports goods that produce at a lower opportunity cost; imports that other nations can produces at a lower opportunity cost. Quantity supplied(domestice) decrease with international trade and is lower than quantity demanded. Imports = quantity demanded - supplied >0: after trade, the domestic price falls to the world price level. Consumers gain= producer"s loss +gain from more consumption------------ society gains from importing . Lower price for imported goods leads to more consumption by consumers--consumers gain . Lower price for imported goods leads to less production by producers--producers lose : exports: world price> pre-trade domestic price. Quantity demanded(bought) decrease with international trade and is lower than quantity supplied. Before trade, consumer and producer surplus are maximized. After trade, the domestic price rises to the world price level. Producers" gain= consumers" loss + gain from more production--- society gains from exporting . Higher price for exported goods leads to less consumption by consumers--domestic consumers lose .