ECON1101 Chapter Notes - Chapter 1: Comparative Advantage, Opportunity Cost, Sunk Costs
13 Oct 2018
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Chapter 1: comparative advantage and the basis for trade. Model: a model is a simplified representation of reality. The amount of resources used to perform a productive activity determines. Creation of production possibility curve (ppc): define the axis for two different products, find two extreme scenarios, find the intermediary scenarios (any possible combinations), plot and connect the points. Figure 1. 2: a representation of the ppc for one agent. Ppc: the ppc represents all possible combinations of bananas and rabbits that (cid:272)a(cid:374) (cid:271)e produ(cid:272)ed (cid:449)ith al(cid:271)erto"s la(cid:271)our if he works the whole day. More generally, the ppc captures all maximum output possibilities for two (or more) goods, given a set of inputs (or resources - i. e. ,time) if inputs are used efficiently( works all available hours/time is not wasted). All the points below and to the left of the ppc are inefficient. both efficient and inefficient points are attainable points.
