ECON 1 Lecture 3: ECON 1-Lecture 2-Comparative Advantage
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A question on assigned reading -- 1p. Several questions for lecture -- 8p (if try half) A true false in the end -- 1p. A country can gain from importing a good from another country even if it is more productive in producing that good (vespa, lecture 2, slide 8) Country should specialize in its comparative advantage, then trade its specialize with others --> both countries are better off. Fish sandwich = 1 loaf of bread + 1 fish. Tradeoff for mr. poor (comparative advantage in baking) Ms. rich: 3/2 (comparative advantage in fishing) Mr. poor: 10 loaves and 0 fish. Ms. rich: 4 loaves and 14 fish. Ms. rich trades 5 fish to mr. poor for 5 loaves. Both benefit (1 more sandwich for each) Experiment 1: buy & sell bushels of apples. Production possibilities frontier --> the various mixes of output that an economy can produce. Ten principles of economics
