ECON 1102 Lecture Notes - Lecture 19: Soybean, Absolute Advantage, Opportunity Cost

• School: Dalhousie University
• Department: Economics
• Course: ECON 1102
• Professor: Boulatoff

Document Summary

Econ 1102 - lecture #19 - chapter 32. Absolute advantage: a country is said to have an absolute advantage over other producers for a product if it is the most efficient producer of that product. Ex: country a produces 2 tons of apples in a week, while during the same time, country b only produces 1 ton of apples. Comparative advantage: a country is said to have a comparative advantage over other producers of a product if it can produce the product at a lower opportunity cost. Ex: instead of producing apples, countries a and b could have been producing oranges. The a(cid:373)ou(cid:374)t of ora(cid:374)ges (cid:862)give(cid:374) up(cid:863) i(cid:374) order to produce apples = the opportu(cid:374)ity cost of produci(cid:374)g apples. Specialization and comparative advantage: two isolated nations (canada and brazil) producing soybeans and steel (in tonnes) in a given period of time, constant opportunity costs: straight-line production possibilities curves, different costs: different technology & resources.