ECON 2610 Lecture Notes - Lecture 4: Dependency Theory
4 Feb 2017
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Ex: 1b and 3a = 2b and 2a. The steeper the curve, the more you love it: france loves food (will give up a lot of c for a little f, usa loves c. Relative to pf: c : k/l = 1/3, f : k/l = 10/1. Increase k and l: and other endowments. Improve labor skill: increase in education, etc. Without trade, we are underachieving because we can only produce a certain amount (ppf) Rate at which you are willing to trade one good for another. A slope = pf/pc = 1/3 or 3c:1f (dtot) A = highest bundle consumers can reach given the ppf. Slope = pf/pc = 4/1 or 1c = 4f (dtot) If pc/pf = 2/1: increase production of f, the closer itot ratio to one side, the more gains for the other country, then . Slope at point = 2/1 or consumer possibilities frontier.
