INTERNATIONAL ECONOMICS. Reasons for trade Coffee from: An apple from: A pencil from: A computer from: Clothes from: ¿WHY? Differences in factor endowments.

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Presentation transcript:

INTERNATIONAL ECONOMICS

Reasons for trade Coffee from: An apple from: A pencil from: A computer from: Clothes from: ¿WHY? Differences in factor endowments Variety and quality of goods Gains from specialization Political

Why countries trade? Factor endowments: If a country can produce a good at a lower opportunity cost than the other, it has a comparative advantage. Gains from trade are gains of increased specialization amongst nations. Where land is cheap but Labour is expensive, will produce more ______ intensive goods. And the opposite. Comparative advantages in the production of goods and services in which they have relatively __________ (scarce or abundant?) endowments of natural resources.

Triangular Trade Benefits All Chapter 15 Figure 15-6

American Production Data Chapter 15 Figure 15-1

Comparative Advantage Illustrated Chapter 15 Figure 15-2

Comparative Advantage Illustrated Chapter 15 Figure 15-2

America before and after Trade Chapter 15 Figure 15-3

Free Trade Allows the World to Move to Its Production-Possibility Frontier Chapter 15 Figure 15-4

Variety and quality of goods / gains from specialization. Example: Case study: Chile: Salmon.

Political

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