EC 201 Lecture Notes - Lecture 3: Cost, Opportunity Cost, Comparative Advantage
Document Summary
The opportunity cost of a good or activity is the option forgone. Tine and budget constraints illustrate the cost of one option in: tuition, room and board, opportunity cost: lost earnings from not working for four terms of the other. Economic self-sufficiency for a country is difficult or impossible and inefficient. In the product market: imports: goods we buy from foreign countries, like hondas, Sony tvs, and french wines: exports: 40% of u. s. agricultural product, like wheat and soybeans, are exported. In the labor market: immigrants come to the u. s. in search of economic opportunity. The president has an absolute advantage in both typing and running the company. Her secretary- a comparative advantage in typing. The opportunity cost is high if the president does the typing. President- giving up running the company to type. President giving up running the company is much bigger than president typing.
