The document discusses questions about India's healthcare system and what the US can learn from frugal innovators in India. It then discusses how trade allows countries to produce outside their production possibility frontiers (PPFs) through specialization and comparative advantage. Countries specialize in what they have a comparative advantage in producing and trade to gain access to other goods. Lowering costs and improving efficiency are benefits of specialization and trade.
1. Discussion Questions for “The Frugal Inventor” 1. Describe why tourists across the world go to Bangalore. 2. In what ways is India’s Healthcare system cheaper and smarter; can they shift their PPF? 3. What can the U.S. learn from “the frugal innovator”?
2. How can we produce outside our PPFS? Specialization and Comparative Advantage
3. Trade and Specialization Trade allows individuals and countries to reach outside of their PPFs Mutually beneficial Lower cost for obtaining goods and services Specialization: the use of all scarce resources to produce one good or service Improves resource allocation, EFFICIENCY same resources = more output
5. How do you decide what to specialize in? COMPARATIVE ADVANTAGE= China: OC (a) < Mexico: OC (a) A country has a comparative advantage if their opportunity cost of producing is less than the opportunity cost of their trading partners
6. The two Advantages When someone produces more of a good in the same amount of time as another When someone can produce a good at a lower opportunity cost in the same amount of time as another Absolute: #s Comparative
7. Steps to Find Comparative Adv. Total output: 15 snowboards, 45 skis Find the Opportunity Costs of Producing One Unit with a ratio
14. BONUS Who has the absolute advantage in the production of skis? In snowboards? Who has the comparative advantage in the production of snowboards and skis? Who will import skis? What price will allow for mutually beneficial trade?
