ECON 102 Chapter Notes - Chapter 2: Absolute Advantage, Comparative Advantage, Opportunity Cost

• School: UBC
• Department: Economics
• Course: ECON 102
• Professor: Soren Lemche

Document Summary

Generalized system-people do all their own tasks (can do everything, so self- sufficient) Specialized system-people do what they"re best at, trade others to satisfy desires -> more productive. Absolute advantage-if person takes less time/resources for a task than another person. Comparative advantage-in doing task, one has lower oc than other person. If person a is better at fixing bikes than tvs, and person b is same as a at fixing. Not fix their own tv (b/c could spend that time fixing bikes, which a is better at) Example: rick takes 20 minutes to fix tv and 10 mins to fix a bike; beth takes 30 minutes to fix either. Oc of fixing tv: rick = fixing 2 bikes (what he gives up in that time) beth = fixing 1 bike. Oc of fixing bike: rick = fixing tv beth = fixing 1 tv. Rick has absolute advantage in both areas, but comparative advantage only in fixing a bike.