Week%202%20Session%202%202009

Week%202%20Session%202%202009 - Microeconomics 1 Econ 1101...

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Diane Enahoro Session 2 2009 1 Microeconomics 1 Econ 1101 Week 2 - Groups A and B Comparative Advantage and the Basis for Trade Ref: Ch 2 and Ch 8 pp204-210 1. Opportunity Cost and Specialisation 2. The Principal of Comparative Advantage 3. The Sources of Comparative Advantage 4. The Production Possibility Curve 5. Shifts of the P.P.C. 6. Barriers to Specialisation
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Diane Enahoro Session 2 2009 2 People living in a group (two or more) can either do everything for themselves or they can specialise. Specialisation will lead to higher a output for the group than self sufficiency will, if a comparative advantage exists. A Production Possibilities Curve model will show graphically how specialisation can lead to greater output in an economy. Specialisation has Costs and Benefits Chapter 8 reinforces these ideas and stresses that if nations specialise where they have a comparative advantage and then trade in a free market countries can have more goods and services.
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Diane Enahoro Session 2 2009 3 Core Principles 1. The Principle of Comparative Advantage “Everyone can do better when each person (country) concentrates on the activities for which their opportunity cost is lower .” 2. The Principle of Increasing Opportunity Costs
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Diane Enahoro Session 2 2009 4 Comparative Advantage and Absolute Advantage and the PPC ; •Definitions 1. “Absolute advantage exists where one person/country can produce more goods in a given time than another economic agent can produce; or takes less time to perform a given task”. 2. “Comparative advantage
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This note was uploaded on 08/06/2011 for the course FIN 3616 taught by Professor Henry during the Three '11 term at University of New South Wales.

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Week%202%20Session%202%202009 - Microeconomics 1 Econ 1101...

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