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Comparative Advantage

Comparative Advantage. Chapter 2. Economic Principle. Trade between two parties makes both better off. What’s the alternative to trade?. David Thoreau at Walden Pond. On a national level: autarky. A policy of national self-sufficiency and nonreliance on imports or economic aid. .

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Comparative Advantage

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  1. Comparative Advantage Chapter 2 ECON201, Maclachlan, Fall 2006

  2. Economic Principle Trade between two parties makes both better off. ECON201, Maclachlan, Fall 2006

  3. What’s the alternative to trade? David Thoreau at Walden Pond. ECON201, Maclachlan, Fall 2006

  4. On a national level: autarky A policy of national self-sufficiency and nonreliance on imports or economic aid. ECON201, Maclachlan, Fall 2006

  5. Mercantilism A country should aim to run trade surpluses and increase its monetary assets. ECON201, Maclachlan, Fall 2006

  6. Adam Smith (1723-1790) Critic of mercantilism. Countries should specialize and trade. Specialize where there’s an ABSOLUTE ADVANTAGE ECON201, Maclachlan, Fall 2006

  7. ABSOLUTE ADVANTAGE A region has an absolute advantage if it takes fewer resources to produce a good there than elsewhere. Coffee in Columbia. Computer software in Silicon Valley. ECON201, Maclachlan, Fall 2006

  8. David Ricardo (1772-1823) Theory of comparative advantage. Even without an absolute advantage a region can trade to the benefit of all parties. ECON201, Maclachlan, Fall 2006

  9. Productivity Information ECON201, Maclachlan, Fall 2006

  10. Productivity and Opportunity Cost ECON201, Maclachlan, Fall 2006

  11. Productivity and Opportunity Cost ECON201, Maclachlan, Fall 2006

  12. Productivity and Opportunity Cost ECON201, Maclachlan, Fall 2006

  13. The Production Possibilities Frontier ECON201, Maclachlan, Fall 2006

  14. A Shift in the Production Possibilities Frontier ECON201, Maclachlan, Fall 2006

  15. Why some countries have been slow to specialize In the lone houses and very small villages which are scattered about in so desert a country as the Highlands of Scotland, every farmer must be butcher, baker and brewer for his own family. --Adam Smith, 1776 ECON201, Maclachlan, Fall 2006

  16. Too much of a good thing? http://www.youtube.com/watch?v=VTgeNw1guBs&mode=related&search= ECON201, Maclachlan, Fall 2006

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