Chapter2_s

Chapter2_s - Chapter2 Chapter2 ComparativeAdvantage...

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Chapter 2 Chapter 2 Comparative Advantage Comparative Advantage
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Learning Objectives: Learning Objectives: 1. The Principle of Comparative Advantage 2. The Principle of Increasing Opportunity Cost 3. Factors that shift the menu of production  possibilities 4. The role of comparative advantage in  international trade
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  Question How can we satisfy our wants and needs  in a global economy? 
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  Interdependence and the Gains  from Trade Why is interdependence the norm? What determines the pattern of  production and trade? 
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  A PARABLE FOR THE  MODERN ECONOMY Imagine an island … only two goods: fruit and meat only two people Pounds of fruit or meat obtained in  one hour  Individual Fruit Meat G 4 1 B 6 3
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The Production Possibilities Curve The  Production Possibilities Curve (PPC):  graph that shows the combinations of two  goods the economy can possibly produce  given the available resources and the available  technology. In the example: Available Resources: 8 hours/day Available Technology: given in the previous  table.  0
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48 24 32 40 16 8 24 16 8 C Production Possibilities Curve Fruit (lb/day) Meat (lb/day) A’ A C’ B B’ PPC for G PPC for B I P
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This note was uploaded on 04/28/2011 for the course ECON 1 taught by Professor Tang during the Spring '08 term at UCSD.

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Chapter2_s - Chapter2 Chapter2 ComparativeAdvantage...

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