Monday, May 9, 2016

UNIT 7: Absolute And Comparative Advantage

                                               Absolute Advantage
Individual- exists when a person can produce more of a certain good/service than someone else in the same amount of time (or can produce a good using the least amount of resources).
National- exists when a country can produce more a good/service than another country can in the same time period.
                                     Comparative Advantage
A person or a nation has a comparative advantage when it can produce the product at a lower domestic opportunity cost than can a trading partner.
                            Examples of output problems
1.      Words per minute.
2.      Miles per gallons.
3.      Tons per acre
4.      Apples per tree
5.      Televisions produced per hour
                                        Examples of input problems
1.      Number of hours to do a job.
2.      Number of acres to feed a horse
3.      Number of gallons of paint to paint a house.
                                      Specialization and trade
·         Gains from trade are based on comparative advantage, not absolute advantage.


4 comments:

  1. This is a great picture that you posted for comparative advantage. It represents to me that the shorter guy is closer to the ground so it's easy for him to pick strawberries from the ground and the tall guy grabs apples from the tree above! Just to add on for your notes, input in an economy has its way to show an economic out put. A great example I read in an article about this is, if you want to build a restaurant you need input of land, labor and capital to have your out put of your restaurant! Hope this was a helpful example!

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  2. Your notes are very good. They helped a lot when it came to understanding the topics. Also the examples you put for output and input problems helped, but it would have helped even more if the examples were a little more detailed including specific words like produce, per hour, time period, etc.

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  3. The picture really helps reiterate the definition of comparative advantage and your notes are very good. It would be more helpful to expand on the clues that help identify input and output problems, so those word problems are easier to complete.

    ReplyDelete
  4. The picture really helps reiterate the definition of comparative advantage and your notes are very good. It would be more helpful to expand on the clues that help identify input and output problems, so those word problems are easier to complete.

    ReplyDelete