Comparative_Advantage__Lesson_8_

Comparative_Advantage__Lesson_8_ - The Global Gain From...

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1 Lesson 8 1 The Global Gain From Trade In this lesson we use the underlying technology specified in the previous lesson to formally illustrate how a redistribution of the world’s resources can yield greater global output Continue to assume that labor is the only input Assume there are two goods ( X and Y ) and two countries (Home and Foreign) Lesson 8 2 Assume that labor can easily move between sectors within a country… …but labor cannot move between countries Lesson 8 3 Define the following notation: H LX a Amount of Home labor required to produce one unit of X H LY a Amount of Home labor required to produce one unit of Y F LX a Amount of Foreign labor required to produce one unit of X F LY a Amount of Foreign labor required to produce one unit of Y
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2 Lesson 8 4 Choose numeric example consistent with the numbers assumed in the earlier lesson on comparative advantage, where we assumed: 2 1 = H Y X P P 3 = F Y X P P Lesson 8 5 Unit Labor Requirements
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Comparative_Advantage__Lesson_8_ - The Global Gain From...

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