ECON 160 Lecture Notes - Lecture 1: Product Differentiation, Deadweight Loss, Price Support
1 Nov 2016
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Economic growth: the expansion of production possibilities- and increase in the standard of living- is called economic growth, two key factors influence economic growth: Capital accumulation: technological change: development of new goods and better ways of producing goods and services, capital accumulation: growth of capital resources, including human capital, the cost of economic growth. To use resources in research and development and to produce new capital, we must decrease our production of consumption goods and services. Economic growth is not free: opportunity cost of economic growth = less current consumption, trade-off between current and future consumption. Gains from trade: comparative advantage and absolute advantage. A person has a comparative advantage in an activity if that person can perform the activity at a lower opportunity cost than anyone else. A person has absolute advantage if that is person more productive than others. Absolute advantage involves comparing productivities while comparative advantage involves comparing opportunity costs: liz"s absolute adva(cid:374)tage.
