Absolute Advantage given the exact same resources country A can produce more of a good than country B Comparative Advantage given the same resources country B produces good X at a lower opportunity cost ID: 777679
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Slide1
Comparative v Absolute Advantage
Slide2Absolute Advantage
given
the exact same resources, country A can produce more of a good than country
B
Slide3Comparative Advantage
given the same resources, country B produces good X at a lower opportunity cost
This means B gives up less of good Y when he produces good X
Slide4Two countries both make T-shirts and Jeans
Country A
Country A can make 100 t-shirts
or
100 jeans
If they make 1 t-shirt they are giving up the chance to make
1
pair of jeans (their opportunity cost is 1 pair of jeans)
If they make
1
pair of jeans, they are giving up the chance to make
1
t-shirt (their opportunity cost is 1 t-shirt)
Country B
Country B can make 300 t-shirts or 100 jeans
If they make
1 t-shirt they are giving up the chance to make 1/3 pair of jeans (their opportunity cost is 1/3 pair of jeans)If they make 1 pair of jeans, they are giving up the chance to make 3 t-shirts (their opportunity cost is 3 t-shirts)
Slide5Two people can wash dishes or vacuum a room
Dan
In one hour, Dan can wash
1
load of dishes or vacuum
½ of a roomIf he washes 1 load of dishes, he gives up the opportunity to vacuum
½
a room
If he vacuums
1
whole room, he gives up the opportunity to wash
2
loads of dishes
Cindy
In one hour, Cindy can wash
1
load of dishes or vacuum 1 roomIf she washes 1 load of dishes, she gives up the opportunity to vacuum 1 roomIf she vacuums 1 whole room, she gives up the opportunity to wash 1 loads of dishes
Slide6Questions
Does anyone have the absolute advantage in dishwashing?
Does anyone have the absolute advantage in vacuuming?
What is Dan’s opportunity cost of washing dishes?
What is Dan’s opportunity cost of vacuuming a room?What is
Cindy’s opportunity cost of washing dishes?What is
Cindy’s
opportunity cost of vacuuming a room
?
Does anyone have the
comparative
advantage in dishwashing?
Does anyone have the
comparative
advantage in vacuuming
?
Slide7Two people can clean offices and jail cells
Andy and Hannah both clean offices and jail cells
Clean 1 Office
Clean 1 Jail Cell
Hannah
20 minutes
15 minutes
Andy
1 hour
30 minutes
Slide8Questions
Does anyone have the absolute advantage in
cleaning offices?
Does anyone have the absolute advantage in
cleaning jail cells?
What is Andy’s opportunity cost of cleaning offices?
What is
Andy’s
opportunity cost of cleaning jail cells
?
What is
Hannah’s
opportunity cost of cleaning offices
?
What is
Hannah’s
opportunity cost of cleaning jail cells?Does anyone have the comparative advantage in cleaning offices?Does anyone have the comparative advantage in cleaning jail cells?