Lecture 23 - 1 International Trade International Trade ...

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Unformatted text preview: 12/7/2009 1 International Trade International Trade ¡ Why people benefit from international trade ¡ increased competition ¡ reduced costs ¡ specialization ¡ Gains outweigh losses ¡ Consumers gain from lower prices and increased 28 ¡ Consumers gain from lower prices and increased variety ¡ Entrepreneurs and workers in industries that expand because of trade realize higher rents and wages ¡ Entrepreneurs and workers in industries that contract because of competition lose profits and jobs ¡ Key: find ways to compensate the losers No Trade No Trade ¡ Country A’s PPF ¡ 0 Clothes and 400 Food 28 Food 400 Country A’s Output Per Worker Food Clothes Country A Country B 4 1 2 1 Population # of Workers 100 150 ¡ 200 Clothes and 0 Food Clothes 200 PPF ¡ linear combination of (200,0) and (0,400) 50 300 ¡ Country B’s PPF ¡ 0 Clothes and 150 Food No Trade No Trade 28 Country B’s Food Output Per Worker Food Clothes Country A Country B 4 1 2 1 Population # of Workers 100 150 ¡ 150 Clothes and 0 Food Country B s PPF Clothes 150 150 ¡ linear combination of (150,0) and (0,150) 75 75 Output Per Worker Food Clothes Country A Country B 4 1 2 1 Trade Trade ¡ absolute advantage ¡ a country is more efficient in producing a good in comparison with another country...
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This note was uploaded on 03/21/2010 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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Lecture 23 - 1 International Trade International Trade ...

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