ECO3704-ch2_summer 2011

ECO3704-ch2_summer 2011 - CHAPTER 2 The Basic Theory Using...

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The Basic Theory Using The Basic Theory Using Demand and Supply Demand and Supply CHAPTER 2 CHAPTER 2
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This chapter shows why we study theories of international trade and the basic theory using supply and demand curves. o Trade is important to individual consumers, to workers and other factor owners, to firms, and therefore to the whole economy. o Trade is also controversial, with perpetual battles over government policies toward trade. To understand all of this, we need to develop theories of why people trade as they do.
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Key Questions About International Trade 1. Why do countries trade? What is the basis for trade, especially the product (commodity) composition? 2. For each country, what are the overall gains (or losses) from trade? 3. What are the effects of trade on each country’s economic structure? Production, Consumption. 4. What are the effects of trade on the distribution of income within each country? Winners, Losers.
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Motorbikes
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ECO3704-ch2_summer 2011 - CHAPTER 2 The Basic Theory Using...

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