AFM131 Chapter Notes - Chapter 3: Absolute Advantage, Comparative Advantage, Free Trade

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM131
• Professor: Bob Sproule

Document Summary

Lo1: describe the importance of the global market and the roles of comparative advantage and absolute advantage in global markets. Free trade: the movement of goods and services among nations without political or economic barriers. Pros: 7 billion potential customers, productivity improves (comparative advantage), inflation does not curtail economic growth, inspires innovation and keeps competition high, low interest rates foreign investors. Absolute advantage: the advantage that exists when a country has a monopoly on producing a specific product is able to produce it more efficiently than all other countries. Lo2: explain the importance of importing and exporting and define key terms used in global business. Small businesses contribute between 25-41% of ca(cid:374)ada"s gdp a(cid:374)d e(cid:373)plo(cid:455) appro(cid:454). seven million people. Is the article prohibited entry into canada? (baby walkers) Is the article subject to some other federally-imposed condition? (labelling laws, emissions) Is there a provincial rule to comply with? (alcohol)