Lecture_13

Lecture_13 - Lecture 13 Principles of Macroeconomics Econ 2...

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Lecture 13 Principles of Macroeconomics Econ 2
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Tracking the Economy
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Tracking the Economy
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Tracking the Economy
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Comparative Advantage and Production Possibilities Specialization and gains from trade Why doesn't each country produce all of the goods it wishes to consume?
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Comparative Advantage and Production Possibilities Specialization and gains from trade The U.S. is many times richer than Bangladesh, why would we trade?
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Comparative Advantage and Production Possibilities Specialization and gains from trade Often, the best player on a team is better than anyone else at each position, where should they play?
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Concepts and Terms Opportunity cost:
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Concepts and Terms Opportunity cost: The value of the next-best alternative that must be foregone to undertake the activity.
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Concepts and Terms Opportunity cost: The value of the next-best alternative that must be foregone to undertake the activity. Bastiat (1850) and the ``broken window'' fallacy. Bill Gates washing his car. Education
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Concepts and Terms Absolute advantage: An individual (or country) has an absolute advantage if it can produce a good using fewer resources than another individual (or country).
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Concepts and Terms Comparative Advantage: An individual (or country) has a comparative advantage if they can perform a task at a lower opportunity cost compared to someone else.
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Absolute and Comparative Advantage: Example Minutes to mow lawn Minutes to wash car Wilma 40 min. 20 min. Betty 60 min. 60 min.
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Who Has an Absolute Advantage? Minutes to mow lawn Minutes to wash car Wilma 40 min. 20 min. Betty 60 min. 60 min. A) Wilma B) Betty
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Who Has an Absolute Advantage? Minutes to mow lawn Minutes to wash car Wilma 40 min. 20 min. Betty 60 min. 60 min. Answer: A) Wilma She can mow and wash faster
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Who Has a Comparative Advantage? Minutes to mow lawn Minutes to wash car Wilma 40 min. 20 min. Betty 60 min. 60 min. Helpful to have a slightly different table
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Minutes to mow lawn Minutes to wash car Wilma 40 min. 20 min.
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Lecture_13 - Lecture 13 Principles of Macroeconomics Econ 2...

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