ECON 202 Lecture Notes - Lecture 3: Squidward Tentacles, Opportunity Cost, Takers
Document Summary
Comparative advantage, gains of trade: please reference the numbers below and the numbers used in econ 202 lecture 2 for the rest of this document. Ricardo (david) argued that by specializing in the production of something & trading, for other things can increase a person"s standard of living. Example: suppose that spongebob produces brats & squidward produces burgers and they trade with one another. For spongebob = net gain in burgers (how many burgers can spongebob obtain via trade net of the amount he could make in the same amount of time) It takes spongebob 12 hours to make 240 brats. Spongebob makes 20 brats/hour, so he will work 240/20 = 12. In those 12 hours, if he made burgers, he"d get 12 x 40 = 480 burgers. Net gain = 600 (trade) 480 (made himself) = 120. 10/hour = 20 x 10 = 200 brats: net gain = 240 (trade) 200 (could make) = 40 brats.
