INTERNATIONAL ECONOMICS

Reasons for trade

Coffee from: An apple from: A pencil from: A computer from: Clothes from:

¿WHY? Differences in factor endowments Variety and quality of goods Gains from specialization Political

Why countries trade?

Factor endowments: If a country can produce a good at a lower opportunity cost

than the other, it has a comparative advantage. Gains from trade are gains of increased specialization

amongst nations. Where land is cheap but Labour is expensive, will produce

more ______ intensive goods. And the opposite. Comparative advantages in the production of goods and

services in which they have relatively __________ (scarce or abundant?) endowments of natural resources.

Triangular Trade Benefits All

Chapter 15 Figure 15-6

American Production Data

Chapter 15 Figure 15-1

Comparative Advantage Illustrated

Chapter 15 Figure 15-2

Comparative Advantage Illustrated

Chapter 15 Figure 15-2

America before and after Trade

Chapter 15 Figure 15-3

Free Trade Allows the World to Move to Its Production-Possibility Frontier

Chapter 15 Figure 15-4

Variety and quality of goods / gains from specialization.

Example: Case study: Chile: Salmon.

Political