9.11.06 - -we use the indifference curves to represent a...

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9/11/06 Internationalecon.com – Text Book Trade -Opportunity cost drives international trade Autarky – country that is not engaged in international trade, island country, self sufficient economy, “Robinson Caruso” economy -production possibilities frontier -scarcity -opportunity cost: how much of one good you give up to produce another -constant opportunity cost: slope of the graph does not change, characterizes the very long run
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Unformatted text preview: -we use the indifference curves to represent a country’s welfare, indifference curves are not allowed to cross-we cannot add up individual preferences to come up with society’s preferences-country is most satisfied when the production possibilities frontier is at a tangent with the indifference curve ***Prove*** Change in A over Change in B = Price of B over Price of A...
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