ECON 102 Lecture Notes - Human Capital, Arbitrage, Comparative Advantage
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ECON 102 Full Course Notes
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Case for international trade importance: rate at which people trade stuff has exponentially increased more than the rate at which people produce stuff. With trade, people can specialize in production and acquire other goods through trading. This is true for individuals, firms and countries. The remarkable thing is specialization and trade increases production (and consumption) possibilities overall. One country has an absolute advantage in the production of a specific product if, relative to another country, it can produce one unit of the product using fewer resources. Canada has absolute advantage over eu in terms of wheat and cloth. One country has a comparative advantage in the production of a specific product if, relative to another country, its oc for producing the product is lower. Canada has comparative advantage with respect to wheat. Eu has comparative advantage with respect to cloth.