ECON 1B03 Lecture Notes - Absolute Advantage, Comparative Advantage, Opportunity Cost
8 Mar 2014
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ECON 1B03 Full Course Notes
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2 people painting, they have 40 hours to work. Martha - 20 rooms or wallpapers 5 rooms. Stewart 10 rooms or wallpapers 8 rooms. Wallpaper given up to obtain some item (going to university instead of working) Martha has a comparative advantage in doing paint. Stewart has a comparative advantage in doing wallpaper. Absolute advantage the ability to produce a good with a smaller quantity of inputs. Ie: canada needs 20 min to make 1 truck, us needs 60 min to make 1 true. Comparative advantage the ability to produce a good with a smaller opportunity cost. Ie: to make 1 car it costs canada 0. 5 trucks, and usa 0. 75 trucks. Should you and your roommate divide household chores evenly? (ch 3) No, he can give up 1 w and get 2 p without trade. The slope of the ppf shows the extreme values of the terms of trade. (the price will be between the two extremes)
