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In Class – Week 2 Gains from Exchange Why do people willingly trade?

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Presentation on theme: "In Class – Week 2 Gains from Exchange Why do people willingly trade?"— Presentation transcript:

1 In Class – Week 2 Gains from Exchange Why do people willingly trade?

2 Comparative Advantage and Trade Learning Objective 2.2 Trade The act of buying or selling. Specialization and Gains from Trade FIGURE 2-4 Production Possibilities for You and Your Neighbor, without Trade

3 How does this work? Two people in this market – You and Your Neighbor Two goods being produced – Apples and Cherries See if you can do better by specializing – That is, what has the least opportunity costs for each of you to produce What will be the market price for exchange?

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