comp advantage graphs and applications
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Trade openerWhat is good about living along the US/Mexico border?
Where was your shirt made? (Have your neighbor check)
http://www.flashworldmap.com/
Today: Mankiw Chapter 3
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Review of PPF’s
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On the production possibilities frontier shown, which point or points are NOT possible for this economy to produce?
a.A, B, C, Db.E and Fc.E onlyd.F only
On the production possibilities frontier shown, which point or points are efficient?
a.A, B, C, Db.B and Cc.E and Fd.F only
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Comparative Advantage Activity
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Absolute Advantage
• Total hours to finish jobs
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Comparative Advantage
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Specialization of labor• Firms & countries
figure out more efficient methods of production
• Effect on concept of trade?
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Honduras
• 100 tons of sugar/year
OR• 100 tons of
bananas
• PPF
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Cuba
• 600 tons of sugar/year
OR• 200 tons of
bananas
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Cuba & Honduras• Scarcity of farm land• Who has absolute
advantage?• Who has the
comparative advantage of trade?
• Why is this better?Cuba:
600 tons of sugar/yearOR200 tons of bananas
Honduras:
100 tons of sugar/yearOR100 tons of bananas
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Developed vs. Emerging markets
Make a shirt in the USA:LandLaborCapital
Make a shirt in Honduras:LandLaborCapital
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Developed vs. Emerging markets
Design smartphone in the USA:LandLaborCapital
Design smartphone in Honduras:LandLaborCapital
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Another way of looking at Comparative Advantage
• Should Jason Terry clean his own house?
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Another way of looking at Comparative Advantage
• Should Lebron James clean his house?
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Another way of looking at Comparative Advantage
• Walmart sells everything?
• Vs
• Specialty shops
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Trade Ruler Game
http://www.nobelprize.org/educational/economics/trade/game/ruler.html
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GATE Economics Principle #1:People Choose, based on preferences
• Your Choice:
• AP Econ Workbook Assignment
• Write 2-3 paragraph to Raul Grijalva explain the concepts of absolute advantage, comparative advantage and the benefits of further expansion of NAFTA into South America
• 5pts extra if I watch you e-send it