Comparative Advantage 2.3

Comparative Advantage Absolute Advantage The group with the lowest opportunity cost of producing an output should specialize in that output Indicates who should do what Absolute Advantage Being able to make something using fewer resources than other producers require Being able to do both better

Who has the ABSOLUTE ADVANTAGE? Who has the COMPARATIVE ADVANTAGE?

p. 51 You David Wash a car x2 Mow the lawn 3 hrs. 90 min. 2 hrs. 1hr. 3 hrs. Compare both of your opportunity costs for the chores Always start with the one withOUT the absolute advantage

Specialization Focusing on a single task enabling greater productivity Leads to division of labor Takes advantage of preferences AND natural abilities Allows workers to gain expertise Bad side? Repetitious routine