Chapter2

Chapter2 - Chapter 2 Why do people trade? Suppose that you...

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Chapter 2 Why do people trade?
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Suppose that you are lost on a desert island. What do you want/need? What resources do you have?
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The Production Possibilities Curve • The Production Possibilities Curve (PPC): The boundary between the combination of goods and services that can and cannot be produced. 0
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The Production Possibilities Curve • Labor: 8 hours per day • Production Technology: Pounds of coconuts or fish obtained in one hour Individual Coconuts Fish 4 1 6 3
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48 24 32 40 16 8 24 16 8 Production Possibilities Curve Coconuts (lb/day) Fish (lb/day) Pounds obtained in one hour Individual Coconuts Fish 4 1 6 3
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Self-Sufficiency • They _____________ and only consume what they produce themselves. • Production possibilities curve would be _________ as consumption possibilities curve. • Assume each spends half a day producing each good. Coconuts Fish Coconuts Fish Production Consumption
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Specialization and Trade Each person specializes in what he/she is better at and trade with each other. Need to compare the costs of production,
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This note was uploaded on 03/16/2010 for the course ECON 1 taught by Professor Tang during the Winter '08 term at UCSD.

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Chapter2 - Chapter 2 Why do people trade? Suppose that you...

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