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Chapter 7

Chapter 7 - Global Markets in Action.docx

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York University
ECON 1000
Ardeshir Noordeh

ECON 1000 October 22, 2013 CHAPTER 7: GLOBAL MARKETS IN ACTION How Global Markets Work • What drives Intl trade? Comparative advantage. o National comparative advantage as the ability of a nation to perform an activity or produce a good or service at a lower opportunity cost than any other nation. • Assume complete Canadian supply and demand with no international trade. Cost of a shirt is $8; Canadian firms produce 4 million shirts and consumer buy 4 million shirts • Assume world demand and world supply of T -shirts determine the world price of a T -shirt at $5. The world price is less than $8, so the rest of the world has a comparative advantage in producing T -shirts. • Assume Canadian jets cost $100 million. World demand and world supply of jets determine the world price of a regional jet at $150 million. The world price exceeds$100 million, so Canada has a comparative advantage in producing regional jets. ECON 1000 October 22, 2013 •
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