ECON 1000 Lecture Notes - Lecture 3: Comparative Advantage, Opportunity Cost
2 Feb 2017
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Ch 3: interdependence & the gains from trade. Reasons for trade: economies of scale the more you do something, the more productive you are (specialize, adam smith the wealth of. Nations, 1776: comparative advantage, david ricardo ricardo"s difficult idea , early 1800s, 2 countries: canada & the us, 2 goods: apples & bananas considering printing. Assume you are a small business owner and are a marketing brochure. While 500 brochures will cost you per brochure, 2,500 will only cost you per brochure. In this case, the printer is passing on part of the cost advantage of printing a larger number of brochures to you. This cost advantage arises because the printer has the same initial set-up cost regardless of whether the number of brochures printed is. Once these costs are covered, there is only a marginal extra cost for printing each additional brochure. : both countries are able to produce both goods, resources: acres of land, canada .
