Class Notes - 9-5-07

Class Notes - 9-5-07 - Microeconomics Class Notes 9/5/07...

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Microeconomics – Class Notes – 9/5/07 Economic Interactions - Individuals/firms trade goods and services with each other - Opportunity for greater product through specialization JIM (Production) A B C Pens 0 4 6 Paper 12 4 0 TOM (Production) A B C Pens 0 2 4 Paper 10 5 0 Absolute (Highest Number) Advantage (AA) : The Individual who can produce more of certain good in absolute terms. (Overall production) Ex. AA in pens JIM AA in paper JIM Comparative Advantage (CA): If they have a lower opportunity cost when producing a certain good, they have the comparative advantage. (A person/group can produce one good at a lower O.C than another person). Calculate opportunity cost for each producer for same good. - O.C per unit Jim produces pens == (12 paper / 6 pens) = 2 paper/pen - O.C per unit Tom produces pens == (10 paper / 4 pens) = 2.5 paper/pen We are just going to work with linear PPFs C.A to produce Pens goes to Jim Comparative Advantage to produce pens is JIM Comparative Advantage to produce paper is TOM o You can never have the comparative advantage to produce BOTH goods
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This note was uploaded on 04/15/2008 for the course ECON 100 taught by Professor Stephaniemartin during the Fall '07 term at Allegheny.

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Class Notes - 9-5-07 - Microeconomics Class Notes 9/5/07...

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