VCU ECON 203 - Comparative Advantage cont. (2 pages)

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Comparative Advantage cont.



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Comparative Advantage cont.

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A more in-depth look at how comparative advantage can benefit society


Lecture number:
36
Pages:
2
Type:
Lecture Note
School:
Virginia Commonwealth University
Course:
Econ 203 - Introduction to Economics
Edition:
1

Unformatted text preview:

ECON 203 1nd Edition Lecture 36 Outline of Last Lecture I Comparative advantage a Definition b Self sufficient c Example d specialization Outline of Current Lecture I comparative advantage a self sufficiency b specialization c definition d example Current Lecture I Comparative Advantage cont a Self sufficiency autarky when your consumption bundle is equal to your production bundle b Specialization when your production bundle is different from your consumption bundle c Comparative advantage definition having the lowest cost production of a good service d Ex Say England and France can make 2 goods bread and wine England can make either 100 bread or 100 wine in a given period It s opportunity cost is 100 bread 100 wine 1 bread 1 wine 1 wine 1 bread Alone it chooses to make 60 bread and 40 wine according to its production curve France can make either 75 bread or 150 wine in a given period It s opportunity cost is 75 bread 150 wine 1 bread 2 wine 1 wine bread Alone it chooses to make 25 bread and 100 wine according to its production curve England has a comparative advantage in bread France has a comparative advantage in wine If each country made both products they would have a total of 85 bread and 140 wine These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute If the countries worked together allowing only 1 product to be made according to the comparative advantages they would have a total of 100 bread and 150 wine This is an increase of 15 bread and 10 wine from them working separately Say they trade 30 bread for 50 wine This would give England 70 bread and 50 wine France would have 30 bread and 100 wine This is more than how much they originally made by themselves Suppose only 50 bread are desired How much wine could be produced England would produce the 50 bread which still allows them to produce 50 wine France would produce 150 wine This gives a total of 200 wine



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