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Lecture 15

ECON 1010 Lecture 15: Lecture 15

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University of Manitoba
ECON 1010
Laura K.Brown

OS98 1. Rancher is more productive in producing potatoes and meat 2. In a world of mercantilism, the rancher would produce and consume, but also sell some meat and potatoes for profit 3. In terms of absolute advantage: 1. The rancher has the absolute advantage 1. Think of cost – in this case, time is cost 4. In terms of opportunity cost, how much meat (1kg) does each player sacrifice/give up in order to produce potatoes (1kg)? 1. Rancher = 10 mins/1 kg of potatoes 1. In that 10 min, could have produced 0.5 kg of meat 2. 1 kg of potatoes costs the rancher 0.5 kg of meat 1. Farmer = 15 min/1 kg of potatoes 1. In that 15 min, could have produced 0.25 kg of meat 2. 1 kg of potatoes costs the farmer 0.25 kg of meat 1. Farmer is producing the potatoes cheaper (opportunity cost advantage) 1. Rancher is producing the meat cheaper (opportunity cost advantage)
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