Study Guides (299,537)
CA (140,993)
UTSG (9,792)
ECO (742)
ECO100Y1 (112)
Study Guide

[ECO100Y1] - Final Exam Guide - Everything you need to know! (98 pages long)Premium

98 pages452 viewsFall 2017

Department
Economics
Course Code
ECO100Y1
Professor
Davor Piskac
Study Guide
Final

This preview shows pages 1-3. to view the full 98 pages of the document.
UTSG
ECO100Y1
FINAL EXAM
STUDY GUIDE
You're Reading a Preview

Unlock to view full version

Subscribers Only

Only page 1 are available for preview. Some parts have been intentionally blurred.

Subscribers Only
You're Reading a Preview

Unlock to view full version

Subscribers Only

Only page 1 are available for preview. Some parts have been intentionally blurred.

Subscribers Only
Week #2 Comparative Advantage and the Gain From Trade
INSIGHT for last week (Opportunity cost)
1. Predictions of economic analysis(rational decision-making) ARE usually accurate
2. Study of non-rational decision-making is a subfield: Behavioural Economics
Production Possibilities Frontier (PPF) = Consumption Opportunities
1. Scarcity (attainable vs. not attainable)
2. Tradeoffs (choices - decisions)
3. Opportunity Cost
Example #1 (Constant Opportunity Cost Case)
Gumdrops
Chocolates
10
0
8
1
6
2
4
3
2
4
0
5
1. Switch from all Gumdrops to all Chocolates
Opportunity cost = 10/5= 2 Gumdrops of one Chocolate
2. Switch from all Chocolates to all Gumdrops
Opportunity cost = 5/10 = 0.5 Chocolate of one Gumdrop
*For a linear PPF, opportunity costs do not change as we move along the PPF.
Gumdrops
Chocolate
10
5
6
2
find more resources at oneclass.com
find more resources at oneclass.com
You're Reading a Preview

Unlock to view full version

Subscribers Only

Only page 1 are available for preview. Some parts have been intentionally blurred.

Subscribers Only
COMPARATIVE ADVANTAGE
An [or country] has a COMPARATIVE ADVANTAGE in an activity if the individual [or country] can perform
the activity at a lower opportunity than anyone else.
*Comparative advantage is the key to the gains from trade, both b/w countries and b/w individuals
Example 2 PPF (Per Week)
Cloth
Corn
John
10
2
Jane
8
4
John has absolute advantage in production of cloth (more efficient producing cloth)
Jane has absolute advantage in production of corn
Opportunity Costs (Constant)
John
Opportunity Cost = 2/10 = 0.2 corn for 1 cloth
Opportunity Cost = 10/2 = 5 cloth for 1 corn
Jane
Opportunity Cost = 4/8 = 0.5 corn for 1 cloth
Opportunity Cost = 8/4 = 2 cloth for 1 corn
Cloth
Corn
John
0.2 Corn
5 Cloth
Jane
0.5 Cloth
2 Cloth
John has a comparative advantage in the production of cloth (0.2 Corn vs 0.5 Corn)
Jane has a comparative advantage in the production of corn (2 cloth versus 5 cloth)
The Benefits of Trading:
Before trade: John and Jane each divide their time equally b/w producing cloth and corn
Cloth
Corn
John
5
1
Jane
4
2
Cloth
Cloth
Corn
Corn
find more resources at oneclass.com
find more resources at oneclass.com
You're Reading a Preview

Unlock to view full version

Subscribers Only

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.