ECON 1BB3 Lecture Notes - Lecture 3: Absolute Advantage, Comparative Advantage, Opportunity Cost

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ECON 1BB3 Lecture 3: Economic Decision Makers and International Trade
Updates
- If you want to write the first midterm early, submit the quiz today
- The free trial for online Aplia expires tonight
o Check A2L if you need help setting up
- Do the math review test before Friday
o Math review test available on Avenue
- Tips for successful use of review test:
o Review other content first
Only attempt the practice when you have already covered all other
relevant material
o Don’t look at the answers before attempting them
o Set a timer and answer questions the way you would on a test
o Don’t take breaks for snacks
o Write in a silent environment, where you are unlikely to be distracted by any
sounds around you
o Only when you have finished the whole test should you check your answers for
any of the questions
- Stay up to date on Avenue to keep on top of course material
Chapter 3
- Lots of definitions
- Domestic decision-makers
o Households, firms, government
- Rest of the world
Chapter 17
- Also contains content to be covered this week
- This includes different kind of PPFs
- Cross-check Aplia and avenue to stay on track of chapters you are responsible for
Advantages
- Mike and Sandy are two woodworkers who both make tables and chairs
- In one month, Mike can make 4 tables or 20 chains, and sandy can make 6 tables or 18
chairs.
o Mike has an absolute advantage in chairs
o Because Sandy can make more tables, she has the comparative advantage and
therefore the absolute advantage
o As a result, Mike has a comparative advantage in chairs
- Hawkeye can either make 80 arrows or 200 hammers.
- Right now, he specializes in arrows
- Thor offers to sell him 25 hammers for 20 arrows Should he take this deal?
o No, he should not
Thor is offering far less than what he needs
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Document Summary

Econ 1bb3 lecture 3: economic decision makers and international trade. If you want to write the first midterm early, submit the quiz today. The free trial for online aplia expires tonight: check a2l if you need help setting up. Do the math review test before friday: math review test available on avenue. Stay up to date on avenue to keep on top of course material. Also contains content to be covered this week. Cross-check aplia and avenue to stay on track of chapters you are responsible for. Mike and sandy are two woodworkers who both make tables and chairs. Hawkeye can either make 80 arrows or 200 hammers. If england and spain trade based on the principle of comparative advantage, who will import what: there"s no way that both england and spain would import either bread or cheese. Labour hours needed to make one unit of: Thor can produce 400 hammers or 100 arrows.

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