ECON 1202 Lecture Notes - Lecture 5: Comparative Advantage, Real Income
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ECON 1202 Full Course Notes
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Econ 1202- lecture 5- markets and the economy. Outward movement of production possibilities curve (ppc) shows increase in gdp. Division of labor- the steps needed to complete a task of good. **most important economic idea that is hidden in plain sight. Allows us to specialize(become an expert in)in certain tasks which drives cost down. Pin factory: split up into specific tasks will get more pins made. Specialization leads to more worker productivity which leads to more income. Greater scope of markets, greater specialization and higher income and higher income countries. It takes advantage of the differences in costs between manufacturers. Urban markets are much bigger and allow for greater/more specific specialization to make you more valuable. Law of comparative advantage: lower opportunity costs than its competitors. Theory of comparative advantage: country should specialize in those it has comparative advantage in and buy the other stuff with other countries doing likewise.
