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Chapter 15 by Evian Zhang

Comparative Advantage and Protectionism

zhang yiyun

on 28 April 2010

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Transcript of Chapter 15 by Evian Zhang

TRADE Why trade? The case for free trade The case against free trade Comparative advantage absolute advantage diversity in the condition of production difference in tastes among nations decreasing costs of large-scale production A country has an absolute advantage
over another country in the production
of a certain good if, for a given amount
of resources, it can produce more of the
good than its competitor Why is free trade a good thing? methods of protection Tariffs Non-tariff barriers Quotas
exchange control
other bureaucratic restrictions Made by Evian ZHang Wollongong International competitiveness What determines the competitiveness of an economy? 'Price' factors The exchange rate
relative inflation rates
unit labor cost
'Non-price' factors Comparative advantage exists when a country has a margin of superiority in the production of a good or service i.e. where the opportunity cost of production is lower. a tax levied by the government on imported goods. design
income elasticities
quality of the product
prompt delivery
after-sales service
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