comparative advantage Flashcards
1
Q
the realities of CA assumptions
A
- 2 countries produce 2 goods → countries trade w many countries, and produce multiple goods
- uses half its resources for each good → not true, depend on demand
- assume full mobility intra-nationally → not perfectly mobile occupationally or geographically
- assume full mobility internationally → easier due to tech improvements, but not full mobility ++ increased mobility w/in countries will DECREASE trade
- constant opp cost → opp cost likely to increase over time bc all resources are not equally suitable and efficient
- no barriers to trade → protectionism
- no transport costs → there is costs, may exceed CA
2
Q
reasons CA may improve?
A
- discovery of new resources that change factor endowments
- new tech/ more efficient methods of prod via new raw materials
- specialise in industries where EOS can be gained
- govt polices to improve qlty of resources
3
Q
reasons CA may be lost?
A
- productivity growths falls behind foreign competition → increased opportunity cost
- depletion of natural resources
- increased opportunity costs
- chaning govt policies
4
Q
CA table
**very impt!!!!!!!!
A
order: output: before specialisation → after spec, before trade → aft spec, aft trade [cars, rice]
Japan: 100, 50 → 110, 45 → 103, 52
thailand: 5, 10 → 0, 20 → 7, 13
world: 105, 60 → 110, 65 → 110, 65
^^table form!!!