Comparative_Advantage__Lesson_2_

Comparative_Advantage__Lesson_2_ - A Simple Economy Prices...

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1 Lesson 2 1 A Simple Economy Prices are determined by supply and demand Focus on supply in this lesson With fully-employed resources, an increase in quantity supplied of any one good necessarily means a decrease in the quantity supplied of some other good Lesson 2 2 Suppose there are two goods: Bread (good X ) Cheese (good Y ) No economy can produce unlimited quantities of goods Idea captured by the Production Possibilities Frontier (PPF) * * Note that in some textbooks this is referred to as a Production Possibilities Curve ( PPC ) Lesson 2 3 X Q Y Q 100 500 E Can’t reach points like E
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