Terms of Trade and the Gains from Trade | AP Macroeconomics

Terms of Trade and the Gains from Trade | AP Macroeconomics | Khan Academy

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6 жыл бұрын

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In this video, we explore how we can use opportunity costs to determine who has comparative advantage in producing a good. By specializing in the production of a good that a country has comparative advantage in, and trading for the other good, both countries have the potential to benefit from the exchange. We can also figure out a trading price (also known as the "terms of trade") which would make both countries willing to trade.
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AP Macroeconomics on Khan Academy: Welcome to Economics! In this lesson we'll define Economic and introduce some of the fundamental tools and perspectives economists use to understand the world around us!
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Пікірлер: 48

@SirValiantIII 5 жыл бұрын

Best explanation I've found so far. Especially considering my teacher refused to meet with me to help me with terms of trade

@bahadireneser2924 3 жыл бұрын

Still has the most sleek and comprehensive explanation, much appreciated !!!

@FarCritical 4 жыл бұрын

The pricing for the trade part really helped me out

@ugustparreangel887 2 жыл бұрын

output table = both variables maximum output given interval PPF: lowest oc. = comparative advantage = trading price for mutual benefit *oc. of 1x given y = 1x = y / x agent a : oc. 1 basketball = 6 / 8 = 0,75 shoes agent b : oc. 1 basketball = 4 / 4 = 1 shoe [trade price agent a to b = > 0,75 < 1] *oc. = 1y = x / y agent a : oc. 1 shoe = 8 / 6 = 1,33 basketballs Agent b : oc. 1 shoe = 4 / 4 = 1 basketbal [trade price agent b to a = > 1 < 1,33]

@ankushmaurya7357 5 ай бұрын

I'm from India.. Best explanation sir 👍

@lwayiphiottet5317 2 жыл бұрын

Thank you for your explanation of Gain from trade. Excellent explanation Mr.

@critch7514 9 ай бұрын

I've been floundering in my econ class, this helps a lot

@sumeenhamid9111 5 жыл бұрын

Very informative!

@Diyaz86 2 жыл бұрын

Perfect explanation!

@mcan543 5 жыл бұрын

This is why the modern economies promotes specialization.

@jansasha2628 6 жыл бұрын

Beautiful

@mehmetaydin3103 4 жыл бұрын

Best ever thank you Khan man

@xchen86 4 жыл бұрын

I was really confusing before I watch this. Thank you!!

@Ratigan2 2 жыл бұрын

I was confusion two!

@rudraguha4618 3 жыл бұрын

great video!

@mili1621 4 жыл бұрын

i really enjoyed and learned while entertaining

@anjalitejwani Жыл бұрын

most underrated teacher

@informalaccount.957 3 жыл бұрын

thanks

@iezioaudi22 4 ай бұрын

What a brilliant explaination!!!!

@Kajneww 5 ай бұрын

THX for it

@sagarnandi6276 5 жыл бұрын

Thank you so much. Take my gratitude sir🙂

@saitamasan9495 2 жыл бұрын

Whats the competitive gain for country B

@erictevoedjre3966 4 жыл бұрын

Can we define Opportunity Cost by saying that it is "The forgone option divided by the chosen option"?

@gayansapuge4008 4 жыл бұрын

Of course you can.It's the way I would explain this to someone.

@mackenziephillips5132 3 жыл бұрын

How did you get the number 15 or did you just make it up?

@mehulgrover1871 3 жыл бұрын

He just made an assumption that he will sacrifice 15 units of pants and keep 5 with itself so he gets 15 shirts in return from the other country

@Fiddydoo 4 жыл бұрын

How do you know the best price between 0.5 shirts and 1.5 shirts?

@ThePie_NedGreen 4 жыл бұрын

plus them together and divide it by 2.

@user-kv2sy7qe5w 4 жыл бұрын

Errrr... in the video, it said the best price 'could be' 1. And usually, in my study, the exam paper will provide us with the condition, like if country A (the pants-producing country) exports 5 units of pants in exchange for 5 shirts...the terms of trade will then be 1S/1P(apply different units according to the question) And in fact, the terms of trade will lay between 0.5S and 1.5S, as mentioned in the video

@metal3543 2 жыл бұрын

There is no "best price" between 0.5 shirts and 1.5 shirts. Any price within that range is mutually beneficial to both countries. The speaker picked 1 because it is easier to work with than a non-integer amount.

@nurtaymergaliyev5864 9 ай бұрын

Were you studying this in university ? if yes, what course@@user-kv2sy7qe5w

@moniqued5517 6 жыл бұрын

Why didn't we find the price to sell shirts? Is it because the opportunity cost is higher than for pants?

@crazytuber008 3 жыл бұрын

We just took one case here. You can find out for pants in a similar manner.

@stewartbrands 2 жыл бұрын

Is this not simplistic enough to be inapplicable in real terms? That is are not marketing(salesmanship) ,style and quality not overriding factors which would push this quantification to the sidelines? Marketing alone would nullify these balancing factors would it not? Is there not a a plethora of real world examples for this? Even the simple choice of a catchy name has shown to affect market share.

@jasonmason6910 4 жыл бұрын

How is 2/3p bigger than 2p? Doesnt 2/3= 0.66 p

@dadyasuo8151 3 жыл бұрын

it is less than 2p and that's why B has the comparative advantage. B's opportunity cost for a shirt is 2/3 of a pair of pants while A has to give up 2 pants to make the same shirt. So B has the advantage in making shirts because it costs less for them.

@bideskristinemayv.4116 3 жыл бұрын

oh my gosh i didnt get it sorry huhu,

@bradendredge6809 3 жыл бұрын

Notes

@bradendredge6809 3 жыл бұрын

I was a little bit confused with the math at the end at first, but then I realized that the 15 for 15 was the deal they made, since it allows for a trade rate between each's opportunity costs for a shirt each pair of pants bought/sold. This is awesome!

@THESKILLZZ9 2 жыл бұрын

A P A N T

@shammaalali352 2 жыл бұрын

Why did u write 1.5 for 3over 2?

@Fr0stbyteGamezz 2 жыл бұрын

if we break it up, 2/2 equals 1 and 1/2 is half. add together and 3/2 is 1.5

@liuguanting9222 6 жыл бұрын

isn't the onther way round?

@AVA-hu4yf 6 жыл бұрын

i agree, im confused by this. How is the energy of one pants half that of one shirt when it takes twice the amount of energy to make 1 pants. Shouldnt it be reversed? Op cost of pants is 2 and op cost of shirts is 1/2?

@bishakhashrestha9936 5 жыл бұрын

i have the same doubt!

@AR99RA 5 жыл бұрын

@@AVA-hu4yf the cost to produce pants is half shirt, for the other one is 1.5. so 0.5 costs less

@rutha1739 4 жыл бұрын

thats what im thinking.. im so confused right now

@rutha1739 4 жыл бұрын

@@AR99RA i dont understand plz