Trading notes

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Describe how international trade affects our economy. How the concept of comparative advantage was relevant to the trade negotiations? You may use the following scenarios in your discussions. Imagine that you belong to one of the following Island.

Crusoe Island
· Abundant population
· Rich in coconuts
· Poor in bananas
· Rich in pearls
· Most people live in thatched huts
· Wood frame house is a luxury
· Defense program = spears
Dafoe Island
· Sparse population
· Poor in coconuts
· Rich in bananas
· Rich in lumber
· Only the very rich have pearls
· Defense program = bows & arrows
Historically, you have kept close to your own island, but with the discovery of "sail power" you have begun to explore and navigate to the other islands. This has prompted you to consider the possibility of trading with the people of the other island

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...the opportunity for Crusoe Island and Dafoe Island to develop their comparative advantages through trade between the islands. Crusoe Island has a comparative advantage relative to Dafoe Island on coconuts, pearls - it is rich in these resources. Moreover, it also has relatively more people and stronger defense program than Dafoe Island. Dafoe Island, on the other hand, has a comparative relative to Crusoe Island on bananas and lumber - it is rich in these ...