ECN 001A Lecture Notes - Lecture 3: Trans-Pacific Partnership, Absolute Advantage, Opportunity Cost
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ECN 001A Full Course Notes
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Linear line = 1 for 1 opportunity cost. Allows us to calculate stuff (absolute and comparative advantage) Slope: rise/run measures the opportunity cost of the x-axis activity. Equation of a line: y = mx + b. Curved line, implies that there is diminishing marginal return to both activities. Anything on the curved ppf is efficient = making at least the one person better off. Patterns of trade are dictated by the comparative advantage (opportunity cost of 2 products) America isn"t part of the trans pacific partnership (tpp) anymore. Can use the ppf to find efficiency. If robinson got better at fishing, the x-axis would shift to the right. Maximum efficiency: point that makes him the happiest. Robinson: 15 coconuts (y) , 10 fish (x) Has the absolute advantage in producing coconuts and fish (her max # of that product that can be produced is larger) (robinson) going from 10 (cid:314) 9 fish.
