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TUESDAY JANUARY 15 - [TUESDAY JANUARY 15 Homogeneous Vs...

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[TUESDAY JANUARY 15] Homogeneous Vs. Specialized 1. constant opp. 1. Increasing opp. cost cost 2. Flat PPF 2. Bowed PPF Economic growth: a long run trend towards producing more goods and services; illustrated by an expansion of the PPF Causes: 1. an increase in available resources 2. a technological improvement CLASS PPF ( SPECIALIZED RESOURCES) 5   Fish                               D °                  C °              B °     A  °   0                                   15  Coconuts - now even more possibilities than before - how else might we get to point D? TRADE Fish Coconuts Them 10 20 US 12 48 Absolute Advantage: the ability to produce more in a given time frame - Which economy should produce each good? Comparative advantage: the ability to produce at a lower opportunity cost Fish Coconuts opp cost F opp cost C Them 10 20 2c ½ F Us 12 48 4c ¼ F Opportunity cost of good X= quantity of Y/Quantity of X - They have comparative advantage in coconuts
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