Class Notes (838,797)
Canada (511,097)
Economics (1,590)
ECO102H1 (155)
Lecture

ECO100 - MAR 18

5 Pages
99 Views
Unlock Document

Department
Economics
Course
ECO102H1
Professor
James Pesando
Semester
Fall

Description
Chap 32 - issues with Fiscal Policy =>Don’t have to know Gains from Trade for Individuals - ● Production Possibilities (Per week) Cloth Corn John 15 3 Jane 32 16 ● Jane has an absolute advantage over John ● We are worried about OC producing cloth and corn ● OC of producing one unit of Cloth Corn John 3/15 = 0.2 corn 15/3 = 5 cloths Jane 16/32 = 0.5 corn 32/16 = 2 cloths ● John has the comparative advantage in the production of cloth ○ lower OC when compared to jane ○ gives up less corn than Jane when he is producing ● Jane has the comparative advantage in the production of corn ○ she can produce corn at a lower OC than john ● Jane has the absolute advantage in the production of both cloth and corn ○ she can produce more cloth and more corn in any given week ● Trade ratio ● There are possible gains from trade whenever there is a comparative advantage ● Having a absolute advantage means that Jane may not completely specialize ● John will specialize in the production of cloth ○ exports cloth to Jane ● Jane will specialize in the production of corn ○ exports corn to John ● Assume the trade ratio is 3 cloths to 1 corn ○ Because of trade, John and Jane can consume beyond their PPF (production possibility frontier) ● The slope of the PPF is the OC of the thing on the x-axis ● The intercept of the PPF are the amount of cloth and corn produced when all resources are devoted to producing only one good ● The slope of PPF is the OC of the product on the x-axis ● Trade ratio is different from the OC, thats why CPF lies to the right ● The slope of the CPF is the trade ratio ● It pivots from the axis of comparative advantage ● The intercepts show how much can be consumed if only one good is consumed ● Jane cannot trade/consume bey
More Less

Related notes for ECO102H1

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit