ECN 204 Lecture Notes - Lecture 14: Comparative Advantage, Opportunity Cost, Exchange Rate

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Principle of comparative advantage= specialization in the production of the good with the lowest opportunity cost. Slope of the frontier shows the opportunity costs mark and marjorie slide in the midterm find the opportunity cost, 10/5=2 opportunity cost of 5/10, majored 25/2, 2/25, once you know the numbers, mark has advantage in jean, and marjorie skirts. Specify the range which they can trade. Any combination on the line is possible for them to trade in. A is initial, b is specialization, c is after trading the consumption bundle, there is. The price at which one currency can be exchanged or converted into another currency. Appreciation of a currency: the currency becoming more valuable (or able to buy more units of another currency) Depreciation of a currency: the currency"s becoming less valuable in relation to another currency. A currency"s value is determined by its supply and demand regardless of which ex change rate system is adopted.

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