Economics 103 Lecture # 9 Comparative Advantage. When we introduce the idea of Comparative Advantage, we’re starting to talk about Production.

Slides:

Advertisements

Similar presentations

Comparative Advantage and International Trade

Advertisements

List 1 Dolch Phases.

Can: Reduced [kn] Most common Short Very quiet (not stressed) Mouth doesn’t move to form vowel STRESS content words (verbs, nouns) 1. I can meet you at.

Absolute Advantage and Comparative Advantage, Specialization and Trade

Absolute and Comparative Advantage, and TRADE. Absolute advantage One nation can produce more output with the same resources as the other.

© 2010 Pearson Education Canada. Why does food cost much more today than it did a few years ago? One reason is that we now use part of our corn crop.

MBMC Comparative Advantage: The Basis for Exchange Comparative Advantage: The Basis for Exchange.

Chapter 2: Opportunity costs. Scarcity Economics is the study of how individuals and economies deal with the fundamental problem of scarcity. As a result.

Comparative advantage Today: An introduction to the advantages of trade.

CHAPTER 1 First Principles. 2 What you will learn in this chapter:  Trade  Gains from trade  Specialization  Equilibrium  Efficiency and equity A.

When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Use the production possibilities frontier to illustrate.

1st 100 sight words.

Unit 1 : MicroeconomicsVisual 1.4 National Council on Economic Educationhttp://apeconomics.ncee.net Absolute Advantage and Comparative Advantage ABSOLUTE.

Comparative Advantage and Trade Lesson 1.4. Gains From Trade We all benefit from Trade, simply because we cannot do everything ourselves. Not only does.

Why Nations Trade? If we are better at making everything, why would we trade with anyone else?

CHAPTER 1 First Principles PowerPoint® Slides by Can Erbil and Gustavo Indart © 2005 Worth Publishers, all rights reserved.

What was the most important document written in 1776?

In the modern global economy:... each country could be economically self-sufficient (producing everything it consumes). In fact, countries tend to specialize.

PowerPoint Presentations for Principles of Microeconomics Sixth Canadian Edition by Mankiw/Kneebone/McKenzie Adapted for the Sixth Canadian Edition by.

High Frequency Word Phrases

High Frequency Word Phrases

Or… Production Possibilities Curve (PPC ) Production Possibilities Frontier (PPF)

Gains from Specialization and Trade

The Production Possibility Model, Trade, and Globalization No one ever saw a dog make a fair and deliberate exchange of one bone for another with another.

Absolute & Comparative Advantage. Absolute Advantage (AA) “the best” -- whoever has the most output (when input is fixed) OR --whoever has the least input.

Specialization & Comparative Advantage Comparative Advantage.

Absolute Advantage Comparative Advantage EQ: How do we gain from trade?

Chapter 3 Exchange and Markets. Consider your typical day –You wake up to an alarm clock made in Korea. –You pour yourself orange juice made from Florida.

Economics  Welcome to Class! Find a folder on the front table, write your name on it, and draw a picture that represents you! (appropriate!)

By Daniel.. American business. This a clear example of war, the U.S.A have been involved in wars all the time in history and also we know that wars happened.

Opportunity Cost The Next Best Alternative. The Opportunity Cost of doing something is the value of the next best alternative you give up. What is the.

Comparative Advantage: Scarcity Comparative Advantage: Scarcity.

The. to and a I you it in said for up look.

Standard  SSEF2a- Illustrate the production possibility curve  SSEF2b-Marginal Cost v. Marginal Benefit = Rational Decision Making.

UNIT IV ECONOMIC SYSTEMS AND TRADE Part 3: Gains from Trade.

MICROECONOMICS Ch2 The Economic Problem Cheryl Fu.

Absolute and Comparative Advantage - AP Macroeconomics

Productivity, Absolute Advantage and Comparative Advantage, Specialization and Trade Unit 1 Lesson 3 by Advanced Placement Economics Teacher Resource Manual.

Production Possibilities Absolute and Comparative Advantage.

Chapter 3 The Economic Problem. Production Possibilities Curve (Frontier): Maximum amounts of 2 goods that can be produced at full employment of all resources.

Lesson 2Macroeconomics – Unit 1. Adam Smith What were Smith’s 2 revolutionary ideas in economics? That by each acting in our own self- interest,

CHAPTER 2 Economic Models: Trade-offs and Trade. 2 What you will learn in this chapter: Three simple but important models:  Production possibility frontier.

A. and away big blue can come down find for.

Comparative and Absolute advantage. COMPARATIVE ADVANTAGE THINK OF a town’s best lawyer who is also its best typist. Provided that she is better at.

McGraw-Hill/Irwin Copyright  2008 by The McGraw-Hill Companies, Inc. All rights reserved. THE PRODUCTION POSSIBILITY MODEL, TRADE, AND GLOBALIZATION THE.

EF310: International Trade and Business

ROLL CALL Would you rather have a Coke or Pepsi?.

MICROECONOMICS Ch2 The Economic Problem

Unit 1 Chapter 2 Trade-offs and Trade

Unit I: Basic Economic Concepts

DO NOW Why do people and countries trade as opposed to just making everything themselves?

Module 4-”Comparative Advantage and Trade”

THE PRODUCTION POSSIBILITY MODEL, TRADE, AND GLOBALIZATION

Chapter 2: Comparative Advantage

Module 4: Trade & Comparative Advantage

Specialization and Trade (1.3)

Chapter 3 Interdependence & Gains from Trade

Comparative Advantage & Trade

International Economics By Robert J. Carbaugh 7th Edition

Comparative Advantage and Gains from Trade

ECONOMIC PRINCIPLES Comparative Advantage

Review with Your Partners

Unit 1 in 35 minutes! Review of production possibilities curves, comparative advantage, and the circular flow of the economy 1.

Module 4: Trade & Comparative Advantage

I am a student. We are students. You are a student. You are students. He is a student. She is a student. It is a student. They are students.

Absolute and Comparative Advantage

Absolute v. Comparative Advantage

Presentation transcript:

Economics 103 Lecture # 9 Comparative Advantage

When we introduce the idea of Comparative Advantage, we’re starting to talk about Production.

30 minutes 8 minutes

Clearly my wife is Absolutely Better at everything (she tells me all the time). But who is the low cost cleaner and weeder?

Gayle is the low cost weeder … she has a comparative advantage in weeding. I am the low cost cleaner …. I have a comparative advantage in vacuuming.

If we had specialized according to our comparative disadvantage: = = 32 Total 92 minutes. Note that one cannot have a CA in everything. Even though one can have a AA in everything.

When you produce against CA, costs either go way up, or quality and quantity go way down. People’s Express Airline.

Assembly lines are examples of extreme specialization. The Classic Custom Auto Co. suggests 200 hours for the drive train.

What is the wealthiest university in Canada?

Why would married couples where both are working full time have higher divorce rates? Because you forgo many of the gains from cohabitation and specialization. Why are we not completely specialized? Because life is pretty boring on the assembly line.

Comparative Advantage and Marginal Cost Curves Let’s just use the example in the book: Who is the low cost (efficient) producer of spinach? Technical vs. Economic Efficiency. What is more efficient: a shovel or a tractor? - the low cost producer isn’t always what produces the most.

What is the best way to produce Guns and Spinach? When production takes place according to CA then the MC is increasing. What would the PPC look like if they produced according to their comparative disadvantage?

If the little economy gets more people in it, then the curves start to “smooth” out. So one reason for why MC increases with output is because increased output requires the use of higher cost inputs.

Comparative Advantage Questions 1.Bangladesh has very low wages, how is it they don’t put Canada out of “business”. Ie. how can Canada trade with low wage countries? 2. How can Canada trade with the US? They are better at everything! 3. Who do we hurt when we stop importing cars from Japan? -growing Cars on the prairies. 4. Should the smartest people be the brain surgeons? 5. Should the fastest typist in an office be the secretary?

We’ve introduced the idea of Marginal Cost -for us the “something” will be output, but marginal costs can be defined in terms of other things … like input costs. Here’s an odd marginal cost application.

Eat protein/fat together, Eat carbohydrates alone. How many know this person: How many of you know about her book: What would the Marginal Cost of one cookie be if you’d just eaten 2000 calories of protein? What is the MC of the second cookie?