ECO 201 Chapter Notes - Chapter 3: Comparative Advantage, W. M. Keck Observatory
Document Summary
Absolute advantage: what a person has if they"re more production than others. Specializing at producing one good with a comparative advantage can help to increases the gains from trade. Central economic planning works poorly because it produces within the production possibilities frontier. Decentralized works best when it has firms markets, property rights and money. Firm: economic unit that hires factors of production and organizes them to produce, sell goods and services. Market: any arrangement that enables buyers and sellers to get information and do business with each other. Property rights: social arrangements that govern ownership, use and disposal of anything of value. Money: any commodity that is generally acceptable as a means of payment. We are currently studying economics in what is known as the information age. A market has two sides: buyers and sellers. There are markets for all kinds of things.
