ECON216 Lecture Notes - Lecture 2: Indifference Curve, Barter, Autarky
Document Summary
Techniques used to turn resources (labour, capital, land) -> output. > ricardian model of comparative advantage- everyone benefits from trade. Skills, abilities of country"s workforce, natural resources available , and sophistication of its capital stock (machinery, infrastructure, communications systems) > heckscher ohli(cid:374) (cid:373)odel- there are winners and losers. 4/ existence of eco of scales in pro pro costs fall as scale of pro rises. The value of mrt is given by the slope of the ppf. Shows combinations of two commodities that yield equal satisfaction to the community or nation: represents a measure of taste and preference. Characteristics of community indifference curves: n the higher the curve, the greater the utility. n negative slope, convex to the origin. (loi) n different curves do not cross. Relative commodity price differentials between two nations reflect comparative advantages, and form basis for mutually beneficial trade. Each nation should specialize in the commodity they can produce at the lowest relative price.
