ECON101 Lecture Notes - Lecture 3: Opportunity Cost, Demand Curve, Complementary Good
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ECON101 Full Course Notes
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Exports; goods and services produced domestically and sold abroad. Imports; goods and services produced abroad and sold domestically. Absolute advantage; ability to make a good or service using fewer inputs than another producer. Comparative advantage: ability to make goods or services at a lower opportunity cost than another producer. When a country chooses to be self-suf cient it means that they are not willing to trade with other countries. Gains from trade can happen due to comparative advantages (differences in opportunity costs). When each country specializes in the goods it has a comparative advantage in, the total production in all countries is higher. Law of demand; quantity of good or service demanded falls as the price rises (everything else is equal). Normal good: demand for the good increases as income increases. The quantity demanded in the market is the sum of the quantity demanded by all buyers at each price. The demand curve shows how price impacts quantity demanded.