ECO100Y1 Chapter Notes - Chapter 3-4: Comparative Advantage, Demand Curve, Opportunity Cost

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18 Dec 2013
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Chapter 3 interdependence and the gains from trade. Absolute advantage: productivity (smaller inputs to produce a good) Impossible for one person tp have a comparative advantages in both goods. Producing goods (comparative advantage) --- total production rises. Individuals benefit from trade by obtaining a good at price that lower than the opportunity cost. Chapter 4 the market forces of supply and demand. Def: a group of buyers and sellers of a particular good/service. Competitive market: there are so many buyers and seller that each has a negligible impact on the market price. Identical goods (price takers) numerous sellers / buyers with no influence over the market price, (e. g. wheat market) Monopoly: one seller (e. g. local cable television) The demand curve: relationship between price and quantity demanded. Quantity demanded: amount of good that buyers are willing to purchase. Law of demand: qd is negatively related to the price. Market demand at each price is the sum of the individuals demand.

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