1. Learning Objective:
Today I will be able to explain how specialization is a result of comparative advantage by working in a division of labor to determine absolute advantage.
Agenda
Learning Objective
Division of Labor
Lecture: Ch. 2.3 Comparative Advantage
Comparative Advantage: Math & Baskets
Worksheet
Exit Slip

2. Specialization & Division of Labor
Why does it take a long time for that guy to make all the burgers?
What is an easier way to produce?
Why have businesses adopted specialization and division of labor?
Can you think of an example today where specialization and division of labor takes place?

3. Specialization & Division of Labor
Person A: Folds paper.
Person B: Cuts paper.
Person C: Staples 3 half-sheets together.
Person D: Stamps each paper & stacks them.
Supervisor

4. Title Notes: Ch. 2.3 Comparative Advantage Absolute Advantage
Absolute advantage is when someone is the best at doing something.
to be able to make something using fewer resources than other production requires.
Ex. America is the best at producing entertainment
Ex. Colt Brennan (Hawaii) is the best at throwing touchdown passes
Ex. Lance Armstrong is the best cyclist
Are there cases where someone might be the best at something but it’s better for them to not do it?---- Yes!

5. Comparative Advantage
Comparative advantage is when a person can produce something at a lower cost than anyone else if they specialize in that output.
Specialization occurs when industrial workers focus on single tasks, enabling each one to be more efficient and productive
Ex. Kobe can produce basketball points at lower cost compared to D'Angelo Russell.

6. Comparative Advantage and Specialization
X hours without Specialization
You
David
Car washing
1.5 2
Lawn mowing 1 3
Total
2.5 5
CONTEMPORARY ECONOMICS: LESSON 2.3

7. CONTEMPORARY ECONOMICS: LESSON 2.3
Would you help David?
CONTEMPORARY ECONOMICS: LESSON 2.3

8. In order to find people’s comparative advantage you DO NOT compare their absolute advantage.
Instead compare their opportunity costs
Why? Because we all know that a superhuman is way better than us at everything—but can they do it all? Nope.
Therefore, we have to look at who has the lower opportunity cost to determine who should do what task (make which good).

9. Gains from specialization
Absolute advantage
Focuses on which of you uses the fewest resources
Law of comparative advantage
Focuses on what else those resources could have produced – that is, on the opportunity cost of those resources.

10. CONTEMPORARY ECONOMICS: LESSON 2.3
Division of labor - An action that sorts the production process into separate tasks to be carried out by separate workers
CONTEMPORARY ECONOMICS: LESSON 2.3

11. CONTEMPORARY ECONOMICS: LESSON 2.3
Drawback of specialization
People are no longer self-sufficient as past generations
CONTEMPORARY ECONOMICS: LESSON 2.3

12. Comparative Advantage Activity
Math
How many math problems in a minute for each person?
Baskets
How many baskets in a minute for each person?
What is the opportunity cost for doing math problems for person A? Person B?
Who has absolute advantage in math? Baskets?
What is the comparative advantage?

13. Worksheet

14. Exit Slip
Provide one real life example of where specialization is used. Next, explain how comparative advantage plays a role in this specialization.
Ex. Lakers for the NBA, championship. Each player specializes on a specific task to ensure they win games to win the championship. Kobe produces points to win games at a lower opportunity cost compared to his teammates.