L11 Econ 1011 Chapter Notes - Chapter 2: North American Free Trade Agreement, Comparative Advantage, Absolute Advantage
24 Sep 2016
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Absolute advantage one person has an absolute advantage over another if he or she takes fewer hours to perform a task than the other person. Comparative advantage one person has a comparative advantage over another if his/her opportunity cost of performing a task is lower than the other person"s opportunity cost. Ex: it takes mary 20 min. to program and 10 min. to fix a bike and paula 30 min. for each of those. Mary has an absolute advantage over paula in both activities since she can both do them faster: but, paula has a comparative advantage over mary at programming. The principle of comparative advantage everyone does best when each person (or each country) concentrates on the activities for which his/her opportunity cost is lowest. Coffee on one axis and nuts on the other axis. Points that lie along or within the curve are attainable. Points that lie outside the curve are unattainable.
