ECON 2002.01 Lecture Notes - Lecture 2: Autarky, Absolute Advantage, Comparative Advantage
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ECON 2002.01 Full Course Notes
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A goes up, b goes up: positive correlation. A goes up, b goes down: negative correlation. A (temperature drops), b (people get sick: correlation not causation. A (temperature drops) c (weakens our immune system) b (people get sick) Omitted variable bias omit the 3rd factor that may be causing things (weak immune system) Human capital theory ex: pay for school to make more money. Signaling theory ex: diploma is a signal of your smartness. Agents: household, firms place that produces goods/services. Opportunity cost = what you give up / get. Ex on ppf: 13-12 / 5-0 = 1/5. Ex on ppf: 12-10 / 10 5 = 2/5. Ex on ppf: 10-7 / 13-10 = 3/3. Ex on ppf: 7-0 / 15-13 = 7/2: b p = opportunity cost of pizza in terms of burger increasing. If ppf curve bows out increasing opportunity cost. If ppf bows in decreasing opportunity cost. If ppf is straight constant opportunity cost.