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q - e Trade offers the benefits of specialization III What...

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Lecture 1 I. Scarcity, choice, and opportunity cost a. Economics: i. The study of choice under conditions of scarcity 1. Scarcity: we don’t have al the resources we want a. Implies making choices i. Which carry an opportunity costs (giving up one thing for something else) b. Everybody that has to make choices confronts scarcity b. One of the fundamental economic problems is the appropriate use of limited resources to produce the goods and services we value most c. Everything we do has a cost II. International economics a. Concerns the flow of commodities, services, and productive factors (capital and labor) across national borders b. Trade refers to imports and exports of merchandise c. Service transactions involve activities performed by companies of one country for residents of another d. Capital flows represent the establishment of manufacturing plants in foreign countries, or acquisition of foreign bonds, stocks, and bank accounts
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Unformatted text preview: e. Trade offers the benefits of specialization III. What makes international economics different? a. Exchange rates b. Commercial policies i. Government restrictions upon international transactions c. Different domestic policies d. Relative immobility of factors of production i. Factors of production are more mobile domestically than internationally e. Marketing considerations f. Statistical data IV.Why do nations trade a. Nations are not equally suited to produce all goods either because they are differently endowed or for other reasons i. All would benefit if each specialized in what it could do best and obtain its other needs through exchange V. Demand considerations a. Supply conditions determine the limits to beneficial trade b. the exchange ratio is determined by each countries’ relative intensity of demand for the other’s products...
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