5 Friday, September 1, 2006

5 Friday, September 1, 2006 - oz/day 24 16 PPF is straight...

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Friday, September 01, 2006 Microeconomics Suppose the price of both gas and CDs doubles -CDs: $20 -Gas: $5 Gasoline (Gallons) 20 Original CPF 10 Opportunity doesn’t change because slope doesn’t change 2.5 5 CDs A change in income results in a parallel shift of the CPF but will leave the opportunity costs unchanged. The opportunity cost depends on the price of one good relative to the price of the other good. So that proportional price changes (both double) leave the opportunity cost unchanged. TRADE (Chapter 3) Two basic ways that people can satisfy their wants 1. Be economically self-sufficient 2. Specialized in the production of one thing and trade with others Simple economy Two individuals: fisherman Fred and Farmer Tom Two goods-Fish and Corn Each work 8 hours a day Amount of fish and corn that can be produced per hour Fish/hr Corn/hr Fisherman Fred 3 oz/hr 5 oz/hr Farmer Tom 2 oz/hr 4 oz/hr Fish/day Corn/day Fisherman Fred 24 oz/day 40 oz/day Farmer Tom 16 oz/day 32 oz/day
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Friday, September 01, 2006 FRED TOM Fish Fish oz/day
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Unformatted text preview: oz/day 24 16 PPF is straight due PPF and CPF Due to the per hour when under Production rate self-sufficiency 40 Corn oz/day 22 Corn oz/day The PPF is a strait line because of each individuals ability to always produce the same amount of both goods per/hour ABSOULUTE ADVANTAGE is an individual firm or nation has an absolute advantage over another individual farm or nation if he can produce more of the product with the same amount of recourses. Fred has absolute advantage in fish Fred has absolute advantage in corn COMPARISON BASED ON PRODUCTIVUTY COMPARATIVE ADVANTAGE is when an individual firm, or nation has a comparative advantage in the production of an item if it produces that item at a lower opportunity cost to the trading partner Comparison based on opportunity costs Opportunity cost of Fred Tom Each oz of fish 5/3 oz/corn 2 oz/corn Each oz of Corn 3/5 oz/corn oz of fish Comparative Comparative With With Fish Corn...
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This note was uploaded on 03/20/2008 for the course EC 201 taught by Professor Xasdf during the Fall '08 term at N.C. State.

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5 Friday, September 1, 2006 - oz/day 24 16 PPF is straight...

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