Week+2+Session+2+2009_2

Week+2+Session+2+2009_2 - Microeconomics1Econ1101...

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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 .” 1.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”. 1.“Comparative advantage
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Week+2+Session+2+2009_2 - Microeconomics1Econ1101...

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