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Here we're taking a look at trade and how comparative advantages and absolute advantages fall into trading decisions.
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We're specifically given this example of a 1950 study performed by the economist bella balassa, which she found is that the u .s.
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Had an absolute advantage over britain in 28 industries.
00:18
Now, we'd like to know whether or not the u .s.
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Should import any goods from britain, given that we understand this absolute advantage that they have.
00:25
Well, the simple answer is that, yes, the u .s.
00:28
Definitely should import some goods.
00:29
Now, we're not given enough information to say which goods for certain, but the goods that they should import are going to be any goods that the u .s.
00:37
Has a comparative, or that britain has a comparative advantage in.
00:41
So if britain has a comparative advantage in, say, let's just say automobiles, which i don't think they do.
00:49
But suppose that britain has a comparative advantage in the auto industry...