ECON 1BB3 Lecture 3: ECON 1BB3- Week 3 Lecture
23 Jan 2019
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He trades 20 arrows so 60 arrows represents his consumption. You can use the diagram to assume that 25 hammers exchange for 20 arrows would be good for thor. This trade would leave him inside of the curve so he is better off not trading. *make sure you are using the side that says how much is produced. They make no sense because you can"t a comparative advantage in both goods. We are assuming there are only two countries and two goods (its not a realistic model of the world). Whoever has the lower opportunity cost should produce that good. England can make 4 times bread and 2 times of cheese. England has a comparative advantage in bread (they are kick ass in producing that) so then spain has a comparative advantage is in spain. Spain will only produce cheese because england has an absolute advantage in both. England will partically specialize in cheese and fully specialize in bread.
