ECON 1B03 Lecture Notes - Lecture 2: Absolute Advantage, Comparative Advantage, Opportunity Cost

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Normative: opinion: minimum wage laws are bad for the economy normative, if the government really wants to help low income families, it should raise the minimum wage. Normative: min wage in ontario is higher than in saskatchewan positive. Costs you gave up in order to attain something else. Canada: to get 10 corn, give up 15 potatoes. To get 1 corn, give up 1. 5 potatoes. (due to resources available). Therefore, opportunity cost of 1 corn = 1. 5 potatoes. Opportunity cost of 1 potato = 1/1. 5 corn = 0. 67 corn. Us: 30 corns = give up 20 potatoes. To get one corn, give up 0. 67 potatoes. Opportunity cost of 1 corn = 0. 67 potatoes while opportunity cost of 1 potato = 1/0. 67 corn = 1. 5 corn. From info above: canada should specialize in potatoes and trade with the us while us should specialize in corn and trade with canada.