Lecture 2 Comparative Advantage

Lecture 2 Comparative Advantage - Suppose that you are on a...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 1 Why do people interact? 2 Suppose that you are What do you want/need? What resources do you have? on a desert island. 3 The Production Possibilities Frontier PPF: The boundary between the combination of goods and services that can and cannot be produced. 4 • The opportunity cost of an action is the value of the next best alternative that must be foregone in order to undertake the activity. • When you undertake an action there are many other things you could possibly do. The opportunity cost of that action is the value of the next best alternative. • Along the PPF, there are only 2 goods, so there is only 1 alternative foregone: some quantity of the other good. Opportunity Cost
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 5 Coconuts Fish 6 60 A B C OC of fish: Point A to B _______ Point B to C _______ Point C to D _______ D 10 20 30 40 50 70 1 23 4 5 Opportunity Cost and the Production Possibilities Frontier 6 Coconuts Fish 6 60 A B C OC of coconuts: Point D to C _______ Point C to B _______ Point B to A _______
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 5

Lecture 2 Comparative Advantage - Suppose that you are on a...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online