Exercise 2

Think of a close relationship between two people you know. You could be part of it, but it could also be

two people you know well.

A Describe a trade on the basis of dynamic comparative advantage between them.

B Give 3 examples of tradeoff in that relationship, ie where having more of one thing inevitably

means having less of something else.

Bonus Give 2 examples of market failures in that relationship, and then how the problems

associated with those market failures are addressed (if at all).