M B A 8620 Chapter Notes - Chapter 17: Economic Equilibrium, Demand Curve, International Trade

• School: Clemson University
• Department: Business Administration
• Course: M B A 8620
• Professor: Ron Gregory

Document Summary

I(cid:374) particular, is the responsiveness of prices to exchange rates greater for highly competitive products or for luxury goods, which are not sold in a competitive market. International trade allows countries to specialize in producing goods and services for which they have a comparative advantage: the ability to produce a food or service at lower opportunity cost than other countries. Absolute advantage: with the same amount of effort, the hungarian worker can produce more of both outputs than can the romanian. The currencies are exchanges in a competitive market, therefore, we can use a supply-demand model to determine the exchange rate or price of one currency in terms of another. Many factors affect the supply and demand for a particular currency, including financial and macroeconomic conditions. If investment opportunities increase in the us relative to those in europe, the exchange rate for the euro falls.