ECON 1 Lecture Notes - Lecture 2: Demand Curve, Absolute Advantage, Economic Equilibrium
Document Summary
Econ1 - introduction to economics - lecture 2: demand supply. The key to a much better standard of living for everyone is trade. The reason we have an economy is that there are gains from trade. A firm has a comparative advantage in producing a good or service if the opportunity cost of producing the good is lower for that firm than for others. A firm has an absolute advantage in an activity if it can do it better than other firms. Absolute advantage is not the same as comparative advantage. By agreeing to specialize and trade, both traders can be better off. Everyone has a comparative advantage in something. Comparative advantage is the basis for trade. Trace can be beneficial to both even if one has an absolute advantage in the production of both goods. The demand schedule shows how much of a good or service consumers will want to buy at various prices.
