ECO 1104 Lecture 2: Comparative Advantage

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Harris

Document Summary

Comparative advantage is the name of the economic theory that explains how trade makes everyone better off, and why impeding trade is not a good idea. Getting something means giving up something else. Opportunity cost what you give up to get something. These are the explicit expenditures plus implicit value - out of pocket money - of the next best alternative you had to do without. Instead of trying to make everything you need yourself, you will be better off specializing in what you"re really good at doing, and trade some of it for things that other people are better at making than you. Imagine if you made all your clothes, grew your food, build your own shelter with all the components you harvested or made yourself mess. No iphones, clothes, music or video downloads that contribute to a good life . Specialize in the things you are best at, eg economist, engineer, doctor, throughout your entire career.