01:220:102 Lecture Notes - Lecture 3: Human Capital, Absolute Advantage, Comparative Advantage

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Published on 15 Oct 2018
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ECON 102 Lecture 3 - Models and Tradeoffs cont.
What Causes Economic Growth:
1) An increase in factors of production - Resources used to create goods or
services
2) Better technology - Technical means for producing goods or services
Factors of Production:
1) Land
2) Labor
3) Physical Capital
4) Human Capital
Theory of Comparative Advantage:
- An economic law referring to the activity of any given economic factor to produce
goods and services at a lower opportunity cost than other economic actors
- Created by David Ricardo
- A country which has the comparative advantage in producing a certain good if it
produces it for the lowest opportunity cost
- The graphic below shows that Country B, while it does have the absolute
advantage in producing both cars and trucks, it has a comparative advantage in
producing trucks since it is 3.5 times better at producing them
economicsonline.co.uk
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