ECON 3601 Study Guide - Comprehensive Final Exam Guide - Labour Economics, International, Free Trade
19 Nov 2018
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Comparative advantage and trade: when countries specialize in production in which they have a comparative advantage, more goods and services can be produced and consumed. Have the united states stop growing roses and use those resources to make. Have colombia stop making 30,000 computers and grow roses instead. If produce goods in which have a comparative advantage (the united states produces computers and colombia roses), they could still consume the same 10 million roses, but could consume 100,000 30,000 = 70,000 more computers. A one-factor ricardian model: the simple example with roses and computers explains the intuition behind the. Ricardian model: we formalize these ideas by constructing a one-factor ricardian model using the following assumptions: For example, alc = 1 means that 1 hour of labor produces one pound of cheese in the home country: alw is the unit labor requirement for wine in the home country.
