rohlf_lecture3 - International Trade Why do countries trade...

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1 International Trade Why do countries trade with each other? Does trade make countries better off? Suppose US trades with Haiti or China … are Haitians/Chinese better off; are US citizens better off?
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2 Trade is increasing in importance
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3 Simple example for why trade occurs Suppose 2 people: Michael Jordon 14 year-old next door neighbor Michael Jordon is good at basketball and makes lots of money Michael Jordon is also good at mowing his lawn – he does it in an hour 14-year-old mows lawn in 3 hours … but MJ hires the kid to mow his lawn Why?
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4 Simple Example Because of opportunity cost Opportunity cost for MJ is very high – he has better things to do with his time Opportunity cost is low for 14-year-old So MJ and 14-year-old trade 14 year-old mows lawn … MJ plays basketball or makes a commercial, pays kid, and still has plenty left over Both are better off through trade
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5 2 Definitions Absolute Advantage : Country A has an
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This note was uploaded on 04/08/2008 for the course ECONOMICS 101 taught by Professor Goodspeed during the Winter '08 term at CUNY Hunter.

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rohlf_lecture3 - International Trade Why do countries trade...

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