in class – week 2 gains from exchange why do people willingly trade?

3
In Class – Week 2 Gains from Exchange Why do people willingly trade?

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Page 1: In Class – Week 2 Gains from Exchange Why do people willingly trade?

In Class – Week 2

Gains from ExchangeWhy do people willingly trade?

Page 2: In Class – Week 2 Gains from Exchange Why do people willingly trade?

Comparative Advantage and Trade

Learning Objective 2.2

Trade The act of buying or selling.

Specialization and Gains from Trade

FIGURE 2-4

Production Possibilities for You and Your Neighbor, without Trade

Page 3: In Class – Week 2 Gains from Exchange Why do people willingly trade?

How does this work?

• Two people in this market– You and Your Neighbor

• Two goods being produced– Apples and Cherries

• See if you can do better by specializing– That is, what has the least opportunity costs for

each of you to produce• What will be the market price for exchange?