ECON 102 Lecture Notes - Lecture 6: Absolute Advantage, Comparative Advantage, Demand Shock

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The farmer and rancher can produce and consume meat and potatoes. 24 kg (c. a) 48 kg (c. a) = comparative advantage. 24 kgs of meat = 48 kg of potatoes. 24/24 kg of meat - 48/24 kg of potatoes. 1 kg of meat = 2 kg of potatoes or 1 kg of potatoes = kg of meat for the farmer, they choose between 8kg of meat - 38 kg of potatoes. 8/8 kg of meat = 32/8 of potatoes. 1 kg of meat = 4 kg of potatoes. Or 1 kg of potatoes = kg of meat. Potato production is relatively cheap suppose these two trade at a price of 1 kg of meat = 3 kg of potatoes? see what each can get from the market rancher produces 24 kg of meat. 24 kg of meat x 3 kg of potatoes/1 kg of meat = 72 kg of potatoes farmer produces 32 kg of potatoes.

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