Textbook Notes (367,844)
Canada (161,454)
Economics (818)
ECON 1100 (224)
Chapter 2

Chapter 2

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ECON 1100
Eveline Adomait

Chapter 2 Exchange and Opportunity Cost - Gains from exchange are possible if trading partners have comparative advantage in producing different goods and services Absolute Advantage: the advantage of taking fewer hours to preform a task than another person does (can produce more of a good) Comparative Advantage: the advantage of having a lower opportunity cost of preforming a task than another person does for the same task (more efficient at producing good aka lower opportunity cost) The Principle of Comparative Advantage - The model of comparative advantage predicts that output can be increased if each person specialized in the task, which they are relatively more efficient in; based on multiple assumptions Comparative Advantage and Production Possibilities - PPC curve slope tells us the opportunity cost of producing an additional unit of the good measured along the horizontal axis - The principle of increasing O.C. tells us that the slope of the PPC becomes steeper as we move downward to the right - Economic growth can be represented by an outward shift of the PPC - PPC curves slope downward because of the scarcity problem Production Possibilities Curve: a graph that describes the maximum amount of one good that can be produced for every possible level of production of the other goo
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