ECON 1BB3 Lecture Notes - Lecture 3: Opportunity Cost, Comparative Advantage
23 Feb 2016
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ECON 1BB3 Full Course Notes
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Martha can paint 20 rom or wallpaper 5 rooms, stewart can paint 10 rooms and wallpaper 8 rooms. Whatever must be given up to obtain some item (ex. In this case it is between painting a room or wallpapering. Martha"s opportunity cost of 20 painted rooms is 5 wallpapered rooms. The ability to produce a good with a smaller quantity of inputs. The ability to produce a good with a smaller opportunity cost. Comparative advantage reflects the relative opportunity cost. Martha"s opportunity cost of 1 painted room is wallpapered rooms. There are 2 interior decorators who can paint and wall paper. Martha can paint 20 rooms or wallpaper 5 rooms, stewart can paint 10 rooms and wallpaper 4 rooms. # hrs needed to do 1 room paint. Martha is better at everything but she has a comparative advantage in painting (thing she is really good at) and stewart has a comparative advantage in wallpapering (he sucks less at that)
