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lecture notes feb 1

lecture notes feb 1 - A Why trade a Adam Smiths Wealth of...

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A.)Why trade a. Adam Smith’s Wealth of Nations i. Specialization ii. Division of labor b. Trade i. Among people ii. Among regions iii. Among nations B.) Supply and Demand in Domestic Market a. Throughout the world rice is exchanged in markets b. Supply curve is upward sloping firm supply more rice to market as the price increase i. Reductions in input pries and improvements in technology shift supply curve to the right ii. Increases in input prices shift supply to the left c. Demand Curve is downward sloping –consumers demand less rice from market as prices increase i. Increase in income causes demand shift to move to right d. Intersection in 2 curves is equilibrium e. Any shifts will change equilibrium C.) Absolute Advantage a. Rice is produced in both Vietnam and Japan b. Assume demand conditions are exactly the same in both countries i. Implies demand curves are the same c. Superior Technology in a sector and or larger endowments of factors used in a sector (lower input prices)
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