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101 lecture 2
- 1. Microeconomics Lecture 2 Trade-offs, Comparative Advantage, and the Market System
- 2. Yabut
- 8. Utopia vs. Reality Reality always loses Realistic Alternatives
- 9. Utility a measure of happiness or satisfaction
- 11. Change Incentives Change Behavior Speed Camera Lottery
- 12. Positive What is Normative What ought to be Fact Values
- 13. Facts True or False Values Good or Bad
- 14. Markets Where Buyers and Sellers Trade
- 15. Households Individuals in a home Sell Factors of Production Buy Goods & Services
- 16. Firms Buy Factors of Production Sell Goods & Services
- 17. Product Markets Markets for finished goods and services - Stores -
- 18. Factor Markets Markets for goods and services used to make products
- 19. Labor Capital Natural Resources Entrepreneurs Spending Wages & Payments for Factors Goods & Services Households Firms Factor Markets Product Markets
- 20. Absolute Advantage Produce more with the same resources Comparative Advantage Produce at a lower opportunity cost
- 21. David Ricardo (1772 - 1823) Principles of Political Economy andTaxation Comparative Advantage
- 23. The basis for trade is comparative advantage, not absolute advantage.
- 25. Gale Ali Total Hours Make a Hook Catch a Fish Total Hours 3 2 5 4 1 5 7 3 10 No Trade 2 Hooks and 2 Fish 10 Hours - 5 Hours per Fish
- 26. Gale Ali Total Hours Make a Hook Catch a Fish Total Hours 2 hooks 6 hours 6 2 fish 2 hours 2 6 2 8 With Trade 2 Hooks and 2 Fish 8 Hours - 4 Hours Per Fish
- 27. Opportunity Cost The highest valued alternative
- 28. Saudi Idaho
- 29. Dates Potatoes 24 0 20 1 16 2 12 3 8 4 4 5 0 6 Ratios 24 to 6 4 Dates for 1 Potato 6 to 24 1/4 Potato for 1 Date Dates Potatoes 6 0 5 5 4 10 3 15 2 20 1 25 0 30 Ratios 6 to 30 1/5 Dates for 1 Potato 30 to 6 5 Potatoes for 1 Date Saudi Arabia Idaho
- 30. 24 30 6 6 Potatoes15 12 3 3 9 15 18 21 9 12 18 21 24 270 0 27 Should Idaho and Saudi Trade?Dates Saudi PPF Idaho PPF Dates Potatoes 6 0 5 5 4 10 3 15 2 20 1 25 0 30 Dates Potatoes 24 0 20 1 16 2 12 3 8 4 4 5 0 6
- 31. Internal Price Dates Potatoes Idaho 5 Potatoes 1/5 Date Saudi 1/4 Potato 4 Dates
- 32. No Trade Dates Potatoes Idaho 3 15 Saudi 12 3 Total 15 18
- 33. Specialize Dates Potatoes Idaho 0 30 Saudi 24 0 Total 24 30
- 34. Analysis Dates Potatoes No Trade Totals 15 18 Specialize Totals 24 30 Gain +9 +12
- 35. Trade Dates Potatoes Idaho 3 to 12 = +9 15 California 12 3 to 15 = +12 Total 24 30
- 36. 24 30 6 6 Potatoes15 12 3 3 9 15 18 21 9 12 18 21 24 270 0 27 Should Idaho and Saudi Trade?Dates Saudi PPF Idaho PPF Trade PPF Idaho gains 9 Dates California gains 12 potatoes
- 37. Slope Percentage Change Relationships Cause and Effect Areas
- 38. Notation % Percent Change % Percentage Change
- 39. % Percentage Change New - Old Old = = .4 = 40%7 - 5 5 2 5
- 40. Last year the price was $6. This year the price is $9. What is the percentage change? New - Old Old = = .5 = 50%9 - 6 6 3 6