Econ 1 - ECON 1 Lecture Notes Chapter 2 Why do people trade...

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ECON 1 Lecture Notes 09/29/10 Chapter 2 – Why do people trade? Question - How can we satisfy our wants and needs in a global economy? o We can be economically self-sufficient o We can specialize and trade with others, leading to economic interdependence - Individuals and nations [not done] Interdependence and the Gains from Trade - why is interdependence the norm? - what determines pattern of production / trade? Case: lost on desert island - what do you want/need? o Water o Shelter o Food o Communication means o Entertainment - What resources do you have? o Trees fruit, vegetables o Creativity, labor o Natural resources Production Possibilities Curve - The PPC: boundary b/w combo of goods/services that can and cannot be produced - Need to know: o Total amt of resources avail for production o Production method/technology (how good you are at doing it) - labor: 8 hrs/day - production technology: Pounds obtained in 1 hr Pounds obtained in 1 hr Individual Coconuts Fish Greg 4 1
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Shub 6 3 From PPC we can tell: 1.
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