ECON 1200 1st Edition Lecture 4Current LectureCHAPTER 2: TRADEOFFS, COMPARATIVE ADVANTAGE, & MARKETS (CONT)- There are two ways to satisfy wants: self-sufficiency and specialization/trade- Self-Sufficiency- Produce everything you want within your own country (doesn’t really work out. There aren’t enough resources for that)o The closest country to reaching self-sufficiency right now is North Korea- Specialization- Produce or do one thing more than another (whichever you’re better at)o Once specialized, you can trade with another country- Trade- The act of buying or sellingo Ex) Trade services for money, then trade that money to get whatever you wanto No one makes us trade, we do it because it’s better for us—we can consume a greater quantity and variety of goods and services- PPFs- Depict the combinations of 2 goods that can be produced and consumed without tradeo Where each individual firm or country produces and consumes on their PPF depends on their preferences- Absolute Advantage- The ability of an individual, firm, or country to produce more of a good or service than competitors using the same resourceso Ex) Assume that without trade, country 1 chooses to produce and consume 50 carts and 300 swords per week, while country 2 chooses to produce and consume 120 carts and 600 swords per week.  In this case, Country B would have the absolute advantage in both swordsand carts because they can produce more of each good than Country A can.- Comparative Advantage- The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.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.o Comparative advantage determines what country trades what goodEXAMPLES OF SHIFTS:TI.ComputersScarcity in labor to make corn shifts the point below the PPF curve. (Now inefficient)ComputersCornCornWhen consumer preferences change such that they will want more computers and lesscorn, some workers quit farming to produce computers. (Frontier curve will not shift in orout. Instead, the point on the curve shifts)When resources used to make goods are destroyed, the entire curve shifts downward.This is because scarcity increases.ComputersCornAn increase in the technology used to make corn shifts the entire curve outward because the firm can produce at a more efficient level than