CHAPTER 9.doc

CHAPTER 9.doc - CHAPTER 9 The determinants of trade The...

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CHAPTER 9 The determinants of trade The equilibrium without trade - Because there is no international trade, price adjusts to Qsupplied by sellers and Qdemanded by buyers The world price and comparative advantage - To figure out whether a country should import or export depends on the current price in the country and the World Price (the price the good sells for in the world market) If the world price is higher than the domestic price, then the country becomes an exporter of the good once trade is permitted If the world price is lower than the domestic price, then the country becomes an importer of the good once trade is permitted - Comparing the domestic price to the world price determines whether a country has the comparative advantage in producing the good. The domestic price of the good reflects the opportunity cost of the good. Is the domestic price is low, the cost of producing the good in the country is low, which suggests that the country has the comparative advantage relative to the rest of the world. If the domestic price is high, the world has the c.a.
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This note was uploaded on 04/13/2010 for the course CA 1001 taught by Professor James during the Spring '06 term at Buffalo State.

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CHAPTER 9.doc - CHAPTER 9 The determinants of trade The...

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