Comparative Advantage              and Specialization                 Sports and TradeWilliamsEconomics
Key TermsSpecializationComparativeAdvantageAbsolute AdvantageOpportunity Cost
SpecializationConcentration on producing things that a countrycan produce most efficientlyWhy do countries specialize? Sp...
Absolute Advantage vs.Comparative AdvantageWhen a country can produce more of thesame “resources” than another country, th...
Neighborly                Chore      Total        Minutes  Comparative                           Time         Spent on    ...
Comparative Advantage       U.S. and Japan                    U.S.           JapanLabor to make       100             120c...
Assume US allocates labor:   100 units tocomputers                           200 units to wheatAssume Japan allocates labo...
What if U.S. allocates all of its production to   wheat and Japan produces as many computers as possible? How much does   ...
Opportunity CostOpportunity cost: trade-off; what you giveup for decisionsIf U.S. makes decision to produce bothcomputers ...
The Story of Babe RuthGreatest power hitters inhistory of Major League baseballLeft-hand pitcherBegin professional care...
Babe, cont’d  String of consecutive scoreless  innings pitched was 29  No designated hitters at time  On days he didn’t pi...
Babe Goes to New YorkContract sold to New YorkYankees in 1920Yankees want to sell seats andimpressed with Babe’s home runl...
The Statistics          Pitching Records of the Boston Red Sox                          1915-1918                         ...
Hitting Records of the Boston Red Sox                      1918-1919                                           Runs       ...
Hitting Records of the New York Yankees                       1920-1924                            Batting   Home        R...
Pitching Records of the New York Yankees                          1920-1924                                             Wi...
What was Babe’sComparative Advantage?Ruth’s comparative advantage wascontingent on how substitutes for himcontributed to t...
New York could show off Ruth’s talentsunlike the Red SoxAttendance and receipts increasedAs a hitter, Ruth helped the Yank...
Summary           Answer the following questions?1. What would have been the Yankees   opportunity cost of using Babe Ruth...
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  • If Adam and David each have a lawn to move and a garden to week. If Adam mows both lawns and David weeds both gardens, each saves 20 minutes that they can spend doing other things. Adam has absolute advantage in both things, but he benefits from trading. This occurs because each person is relatively more efficient in one activity than another. By specializing, they BOTH save time. WIN/WIN instead of zero-sum gain.
  • US produces 1 computer and 40 tons wheat Japan produces one computer and 22.5 tons wheat, World gets 2 computers and 62.5 tons of wheat
  • US=0 labor % 100 = NO COMPUTERS; 300 % 8 = 60 tons wheat Japan=240 % 120 = 2 computers; use rest of labor for wheat, 60%8=7.5 WORLD has 60 + 7.5 tons wheat, for total of 67.5, which is great than prior answer AND two computers. JAPANs converts 120 % 8 or 15 wheat to 1 computer US converts 100 % 5 or 20 tons wheat to one computer
  • U.S. baseball player, one of the greatest hitters and most popular figures in the sport's history. He was born in Baltimore and raised in poverty. He began his career in 1914 as a member of Baltimore's minor-league team, and joined the Boston Red Sox later that season. He started as a pitcher, compiling an outstanding record (94 wins, 46 losses), but switched to the outfield because of his powerful hitting. Sold to the New York Yankees in 1920, he remained with the team until 1934; he played his last year with the Boston Braves (1935). He coached the Brooklyn Dodgers in 1938, but his reputation for irresponsibility prevented his obtaining a permanent coaching or manager's job. His prodigious slugging earned him the nickname "Sultan of Swat." In 1927 he set the most famous of all baseball records when he hit 60 home runs in a single season, a mark that stood until 1961. He hit at least 50 home runs in four separate seasons and at least 40 in each of 11 seasons. His career slugging percentage (.690) remains an all-time record; he ranks second in career home runs (714, behind H. Aaron), runs (2,174, behind T. Cobb), and runs batted in (2,213, again behind Aaron), and third in extra-base hits (1,356, behind Aaron and S. Musial).
  • Comparativeadvantage copy

    1. 1. Comparative Advantage and Specialization Sports and TradeWilliamsEconomics
    2. 2. Key TermsSpecializationComparativeAdvantageAbsolute AdvantageOpportunity Cost
    3. 3. SpecializationConcentration on producing things that a countrycan produce most efficientlyWhy do countries specialize? Specialization means focusing on strengths Success means maximizing profit (increased exports)Why do sports teams specialize? Specialization means focusing on strengths Success in sports means maximizing profit Teams want specialty players who will bring up attendance
    4. 4. Absolute Advantage vs.Comparative AdvantageWhen a country can produce more of thesame “resources” than another country, theyhave an absolute advantage.Comparative advantage encouragescountries to produce those goods for whichthey have the lower opportunity cost thananother countryIn sports, comparative advantage explainswhy some athletes play one sport overanother or one position over another
    5. 5. Neighborly Chore Total Minutes Comparative Time Spent on Spent in Each Advantage Minutes ChoreComparative Advantage explains why specialization arises ADAM DAVID W/Tade 40 160 W/OT radeeven when other people Mow enjoy absolute lawn 120 80advantage in producing Weed 60 160 all goods garden 100 200 Comparative Time 100 320advantage=do what you working 220 -- do best and trade for without rest (or find substitute trade supplier) Time 80 -- working 200 280 with trade Net gain 20 20 -- from 40 trade
    6. 6. Comparative Advantage U.S. and Japan U.S. JapanLabor to make 100 120computersLabor to grow 5 8a ton of wheatCOPY this chart into your notebook to answer the following question in class.What country has the absolute advantage incomputer production?What country has the absolute advantage inwheat production?
    7. 7. Assume US allocates labor: 100 units tocomputers 200 units to wheatAssume Japan allocates labor: 120 to computers 180 to wheat How much wheat and computers does the U.S. produce? How much wheat and computers does Japan produce? What are “world” production totals?
    8. 8. What if U.S. allocates all of its production to wheat and Japan produces as many computers as possible? How much does the “world” produce?Japan converts wheat to computers at therate of ____ tons wheat to 1 computerU.S. converts wheat to computers at therate of ____ tons wheat to 1 computerU.S. sacrifices production of more wheatthan Japan in the production of 1 computerU.S. has comparative advantage inproduction of wheatJapan has comparative advantage inproduction of computers
    9. 9. Opportunity CostOpportunity cost: trade-off; what you giveup for decisionsIf U.S. makes decision to produce bothcomputers and wheat, it gives up theopportunity to make more wheatDecision to play a sport or play a certainposition in sports has opportunity costs.Ex: If you play running back in football, yougive up the opportunity to throw the ball.
    10. 10. The Story of Babe RuthGreatest power hitters inhistory of Major League baseballLeft-hand pitcherBegin professional career withBoston Red Sox in 1914By 1915, was starting pitcher1916-leads American League inearned run average andshutouts; finished third in strike-outs and winsLeads Red Sox to win WorldSeries championships in 1915,1916, 1918
    11. 11. Babe, cont’d String of consecutive scoreless innings pitched was 29 No designated hitters at time On days he didn’t pitch, Babe was first baseman or outfielder As part-time hitter, hit 11 home runs in 1918 (tied in American League) Most runs hit by team members: 1 !! 1918-1919: Out of 46 homeruns hit by Red Sox, he hits 40 (86%); with only 11% of team’s at bats, accounts for 24% of runs batted in
    12. 12. Babe Goes to New YorkContract sold to New YorkYankees in 1920Yankees want to sell seats andimpressed with Babe’s home runlegacyYankees break leagueattendance record by 1920 andwin American League Pennant 7times between 1920 and 1932;Yankees also win 4 World Series
    13. 13. The Statistics Pitching Records of the Boston Red Sox 1915-1918 Wins/(Wins + Wins Losses Losses)Foster 41 22 0.651Shore 48 34 0.585Leonard 57 42 0.576Mays 67 40 0.626Ruth 78 40 0.661Total 291 178 0.620
    14. 14. Hitting Records of the Boston Red Sox 1918-1919 Runs At Batting Home Hits Batted Bats Ave Runs InTeam 6,647 1,789 0.269 46 754Ruth 749 234 0.313 40 180Ruth/ 0.113 0.131 -- 0.87 0.24Team
    15. 15. Hitting Records of the New York Yankees 1920-1924 Batting Home Runs At Bats Hits Average Runs Batted InTeam 21,891 6,655 0.304 516 3,337Ruth 2,455 908 0.370 235 659Ruth/ 0.112 0.136 -- 0.455 0.197Team
    16. 16. Pitching Records of the New York Yankees 1920-1924 Wins/(Wins + Wins Losses Losses)Mays 66 44 0.600Shawkey 90 59 0.604Hoyt 73 47 0.608Bush 62 38 0.620Jones 43 27 0.614Pennock 40 15 0.727Quinn 26 17 0.605Collins 25 13 0.658Total 425 260 0.620
    17. 17. What was Babe’sComparative Advantage?Ruth’s comparative advantage wascontingent on how substitutes for himcontributed to the team’s win ratioYankees had a strong pitching staff; didn’tneed RuthRuth had a comparative advantage as ahitter for the Yankees because they had astronger pitching staff.
    18. 18. New York could show off Ruth’s talentsunlike the Red SoxAttendance and receipts increasedAs a hitter, Ruth helped the Yankees achievethe possible win ratio for their teamComparative advantage explains why BabeRuth, the best pitcher in the AmericanLeague in the late 1920s, specialized inhitting home runs after Boston traded him tothe New York Yankees.
    19. 19. Summary Answer the following questions?1. What would have been the Yankees opportunity cost of using Babe Ruth as a pitcher? Note: A pitcher does not usually pitch in every game and hence, will not be in the batter lineup every game.2. If the Yankees had had a poor pitching staff, in which position(s) would Babe Ruth have a comparative advantage?

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