ch11 (5) - Nontraded goods Some goods are inherently...

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Nontraded goods Some goods are inherently nontradable; Most goods fall somewhere in between freely tradable and purely nontradable. For example: a cup of coffee in a café. It includes some highly- traded components (coffee beans, sugar) and some nontraded components (the labor input of the barista). Imperfect competition and legal obstacles Many goods are differentiated products, often with brand names, copyrights, and legal protection. Firms can engage in price discrimination across countries, using legal protection to prevent arbitrage E.g., if you try to import large quantities of a pharmaceuticals, and resell them, you may hear from the firm’s lawyers. Price stickiness One of the most common assumptions of macroeconomics is that prices are “sticky” prices in the short run. PPP assumes that arbitrage can force prices to adjust, but adjustment will be slowed down by price stickiness.
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ch11 (5) - Nontraded goods Some goods are inherently...

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