Part 3: Understanding Trade
15 | Conditions For Trade
Essential conditions for trade include individual differences, the ability to communicate, the ability to transport, and the ability to establish and maintain institutions.
16 | Comparative Advantage
If someone has a lower opportunity cost of producing a given service, that person enjoys a comparative advantage in the production of that service.
18 | Buyers
When people make decisions about which goods and services to buy, they exhibit a predictable pattern of behavior concerning how much they are willing to buy over a given period of time.
19 | Sellers
If people are doing the best with what they have, we should be able to observe a predictable pattern of behavior over time regarding their willingness to sell goods and services at various prices.
21 | A Market Responds: Price and Quantity
Now that we understand and have constructed demand and supply curves, we can use them together to interpret the impact of economic changes on market outcomes.
22 | Economic Surplus
The amount of surplus generated in a market depends on the quantity traded, and who is trading.
24 | Price Controls
Price controls are restrictions in the movement of prices, and they come in two forms: price ceilings, and price floors. Price ceilings are maximum allowable prices.
25 | Economic Science: Putting Theory to the Test
In a laboratory experiment, as in real life, price controls—floors and ceilings—prevent buyers and sellers from sending each other a signal.