ECN 211 Chapter Notes - Chapter 3: Comparative Advantage, Opportunity Cost, Absolute Advantage
Document Summary
Mankiw video: why trading with others makes good sense. Even if you were the best sewer, farmer, and builder, you wouldn"t keep all of those resources to yourself. You share and trade and make money o of it. Chapter 3 - interdependence and the gains from trade. Interdependence is possibly because people trade with one another. People provide goods and services to consumers because they get something in return. The rate at which society could trade one good for the other depended on the amounts that were being produced. Ppf"s are useful in showing the trade-o s, but they don"t tell us what they"ll choose to do. Absolute advantage- ability to produce a good using fewer inputs than another producer. Opportunity cost- what we give up to get something. Comparative advantage- ability to produce a good at a lower opportunity cost than another producer. Gains from specialization and trade are based on comparative advantage.
