Input vs. Output

Input vs. Output Output problems state that you get a certain amount of product out of a given input. Examples miles per gallon, pieces of gum per dollar... Input problems state that it takes a certain amount of input to get a given product. Examples are hours to do a job, apples to make a pie,

Absolute Advantage For output problems you look at if one nation (individual/company) can produce more output with the same resources as the other. Examples: Output: (Tons produced per hour) Milk Cheese Ted 70 15 Nancy 40 45

Comparative Advantage One nation (individual/company) can produce a good at a lower opportunity cost than the other. This comes into play when one individual (nation, company....) has the absolute advantage in both.

Comparative Advantage Output method: put the output of each product over the output of the other product for the same person. This makes a fraction. Look at the opportunity cost. The person with the lowest opportunity cost should produce the good that costs the least. Corn Wheat Mike 8 6 John 2 4

Comparative Advantage Put the output of each product over the output of the other product. Corn Wheat Mike 6/8 8/6 John 4/2 2/4 Corn Wheat Mike 3/4 4/3 John 2 1/2

Comparative Advantage Pie Juice Jeff 5 3 Judy 6 Pie Juice Jeff 5/3 3/5 Judy 6/3 3/6 Input Method: divide the input required for each product into the input for the other product. Then take the one with the lowest opportunity cost Reduce it:  5/3 is less than 6/3 so Jeff should produce pie. 3/6 is less than 3/5 so Judy should produce Juice.