ECON 1040 Lecture Notes - Lecture 3: Comparative Advantage, Opportunity Cost, Absolute Advantage
Document Summary
Interdependence: rely on other people from around the world to provide goods that we use everyday. Ex: us & japan: two goods= computers and wheat, one resource= labor (measured in hrs. , how much of both goods does each country produce and consume. If the country chooses to be self-sufficient: production possibilities has 50,000 hours of labor available for production per month. Us ppf: producing once computer requires 100 hours of labor, producing one ton of wheat requires 10 hours of labor. Japan ppf: uses half of labor to produce each good= 120 computers and 600 tons of wheat, 30,000 hours possible, computers= 125 hrs. Without trade: us consumers get 250 computers, 2500 tons of wheat, japanese consumers get 120 computers and 600 tons of wheat. Suppose the us exports 700 tons of wheat to japan, and imports 110 computers from japan. Consumption = produced + imports, - exports.
