ECON 2002.01 Lecture Notes - Lecture 6: Comparative Advantage, Absolute Advantage, Free Market

• School: Ohio State University
• Department: Economics
• Course: ECON 2002.01
• Professor: Darcy Hartman

Document Summary

The primary purpose of chapter 2 is to utilize the production possibilities model to demonstrate the concept of scarcity. It is important that you become very comfortable with the setup of this model, along with understanding all the information that is conveyed. Models simplified, abstract versions of the real world. Simplifying assumptions might seem unrealistic, but a good model explains a lot and fits what we observe. We will look at trade-offs in a mathematical, graphical way. Invisible hand refer to friedman video on carmen from week 1. Production possibilities curve model of producer choice, ppc. Attainable a possible point of consumption or production. Unattainable not possible to consume or produce due to insufficient resources. Efficient a point on the cpc or ppc. Inefficient a point inside the cpc or ppc, not utilizing resources in the best way. Absolute price price in terms of $ or currency. Relative price value of one good in terms of another.