ECON 101 Lecture Notes - Lecture 11: Price Drop, Free Trade, Unfair Competition
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ECON 101 Full Course Notes
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All about comparative advantage: do more of what you are good at and less of what you are bad at. Both better off: irrelevance of geography. Only difference is goods are called imports and exports. Trade is about cooperation not competition: make (cid:449)hat you"re good at, buy (cid:449)hat you"re (cid:271)ad at. Import if world price + trade costs < domestic price. Export if word price + trade costs > domestic price. Equilibrium = world price + trade price. Assessing the effects of international trade: what price will good sell at, what quantity will it sell at, the difference is made of importing/exporting. Consequences of trade: no trade, free trade, analyze differences. National security: do(cid:374)"t (cid:449)a(cid:374)t to rely o(cid:374) other (cid:272)ou(cid:374)tries to (cid:373)a(cid:374)ufa(cid:272)ture defe(cid:374)se weapons, counter argument. Infant industries: want industries to grow in their own country to boost specialization. Raises comparative advantage over time: counter argument. Unfair competition: can drive down prices to kick out competitors.
