Chapter 2 - Markets, Specialisation and Economic Efficiency

Chapter 2 - Markets, Specialisation and Economic Efficiency...

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Markets, Specialisation and Economic Efficiency – Principles of Economics (Ch.2) 14/11/10 One Aspect of the differences in economic life between developed and undeveloped countries is the high degree of specialisation by firms and households in developed countries with hat in undeveloped countries. In poorer economies, we observe widespread household production of goods and services to be consumed within the same households. Absolute Advantage: One person has an absolute advantage over another in the production of a good if she can produce more of that good than the other person. Comparative Advantage: One person has a comparative advantage over another in the production of a good if she is relatively more efficient than the other person meaning that her opportunity cost is lower than her counterparts. E.g. you have a comparative advantage in designing a web page if your opportunity cost (doing something else) are lower than that of your opponent Individual Level: comparative advantage may spring from differences in talent or ability or from differences in education, training, experience National Level: incl. these learned differences and differences in language, culture, institutions, climate, natural resources and a host of others Opportunity Costs: o OC a= Loss in B/Gain in A o OC b= Loss in A/Gain in B
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  • Spring '14
  • Economics, partner, Web page, Division of Labour, incl.

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