Warm-Up If you were a contractor building a new house, which people would you need to hire? Why wouldn’t one contractor just do everything on his/her own?

Law of Comparative Advantage Comparative Advantage: The ability to produce something at a lower opportunity cost than other producers. The individual with the lowest opportunity cost for producing a particular good should specialize in the production of that good.

Example: Should Mrs. X Grade Her Own Papers? Mrs. X can grade 50 tests in one hour, but she can also spend that time tutoring a student for $100/hour. Her TA can grade 25 tests in one hour or use that time scooping ice cream for $8/hr. Opportunity Cost for teacher to grade papers? Opportunity Cost for student to grade papers? Who should specialize in what?

Absolute Advantage A country or a business that can produce more products using less resources.

In Groups 1.Define the concept 2.Include an example/real life scenario 3.Create a diagram/drawing to represent the concept.