ECON 203 1nd Edition Lecture 36Outline of Last Lecture I. Comparative advantagea. Definitionb. Self sufficientc. Exampled. specializationOutline of Current LectureI. comparative advantagea. self sufficiencyb. specializationc. definitiond. exampleCurrent LectureI. Comparative Advantage (cont.)a. Self sufficiency- autarky- when your consumption bundle is equal to your production bundleb. Specialization- when your production bundle is different from your consumption bundlec. Comparative advantage definition- having the lowest cost production of a good/ serviced. 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 = ½ 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 140wine.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 This is more than how much they originally made by themselves.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. Suppose 150 bread are desired. How much wine could be produced?England would only be able to produce 100 bread. This forces France to produce the remaining 50 bread, which still allows them to produce 50 wine. A total of 50 wine could be
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