ECON101 Lecture Notes - Lecture 3: Comparative Advantage, Opportunity Cost, Absolute Advantage
25 Sep 2018
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Econ 101: Chapter 3
Interdependence!
-you rely on many people from around the world, most of whom you’ve never met, to
provide you with the good and services you use!
Trade!
-one of the 10 principles!
•trade can make everyone better off!
-example!
•2 countries: Canada and japan!
•2 goods: computers and wheat!
•1 resource: labour (measured in hours)!
•look at how much both goods each country produces and consumes in two
scenarios!
-country chooses to be self-sufficient!
-country chooses to trade with the other country!
•PPF for canada!
-50,000 hours of labour!
-1 computer = 100 hours!
-1 ton of wheat = 10 hours!
-consumption without trade is 250
computers and 2500 tons of wheat!
•PPF for japan!
-30,000 hours of labour!
-1 computer = 125 hours!
-1 ton of wheat = 25 hours!
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Document Summary
You rely on many people from around the world, most of whom you"ve never met, to provide you with the good and services you use. One of the 10 principles: trade can make everyone better o . Example: 2 countries: canada and japan, 2 goods: computers and wheat, 1 resource: labour (measured in hours, look at how much both goods each country produces and consumes in two scenarios. Country chooses to trade with the other country: ppf for canada. 1 ton of wheat = 10 hours. Consumption without trade is 250 computers and 2500 tons of wheat: ppf for japan. 1 ton of wheat = 25 hours. Consumption without trade 120 computers and 600 tons of wheat: exports: goods and services produced domestically and sold abroad, imports: goods and services produced abroad and sold domestically, consumption with trade. Suppose canada exports 700 tons of wheat to. Absolute advantage: ability to make goods or services using fewer inputs then another producer.
