- Individuals and Countries can be made better off if they will produce in what they have a comparative advantage and then trade with others for whatever else they want/need.
Absolute Advantage: The producer that can produce the most output OR requires the least amount of inputs (resources)
Comparative Advantage: The producer with the lowest opportunity cost.
Countries should trade if they have a relatively lower opportunity cost.
- An output problem presents the data as products produced given a set of resources. (ex. Number of pens produced)
- An input problem presents the data as amount of resources needed to produce a fixed amount of output. (ex. Number of labor hours to produce 1 bushel)
- When identifying absolute advantage, input problems change the scenario from who can produce the most to who can produce a given product with the least amount of resources. as
Thank you for your notes! I wasn't at school on the day that you took these notes and it helped me a lot!
ReplyDeleteAlso, if you add a video, it would help me out EVEN MORE with understanding the concept. However, overall, your notes were great!