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CORNELL / Economics / ECON 1120 / jennifer wissink

jennifer wissink

jennifer wissink

Description

School: Cornell University
Department: Economics
Course: Introductory Macroeconomics
Professor: Jennifer wissink
Term: Summer 2015
Tags: Econ, Economics, Macroeconomics, Macro, production, possibilities, Frontier, International, trade, community, indifference, curve, specialization, Ricardian, and model
Cost: 25
Name: ECON 1120 Week 2 Notes
Description: These notes cover applications of PPF, international trade, the community indifference curve, specialization, and the Ricardian Model.
Uploaded: 02/09/2017
4 Pages 127 Views 0 Unlocks
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App. of PPF - int. trade

  • reasons countries benefit from Foreign trade
  • country can imp. resources they lack or are rel. ineff. producers of
  • specialization can permit lg scale production

  • reasons against
  • “unfair trade" (cheap goods)
  • Free v. Fair trade (EFF. V. Equity)

  • CA does not imply that that country should export that good
  • depends on world price (0.c.)

  • Where on a PPF does a country prod?
  • depends on community indifference curve

  • C.L.C. - captures tradeoff in consumption For consumers for a given level of utility, measurement of happiness

        We also discuss several other topics like What happens in acid base titration?

We also discuss several other topics like Who is Dairy Carrie?

  •  Utility-all comb of 2 goods which gives fixed level of happiness - measured in 'utils'

Don't forget about the age old question of What are the attractive forces between particles of a substance?
Don't forget about the age old question of What were the effects of the Seven Years' War?

2 wine + 5 cloth = 10 utils

4 wire + 2 cloth = 10 utils

(goods = substitutes in consumption)Don't forget about the age old question of What can be thought as rolling evolutionary device?

Don't forget about the age old question of List the different the types of experiments.

Prop. of CIC'S

  1. downward sloping, convexe origin
  2. slope @ ang pt = Marg. rate of substitution blow 2 goods
  3. Slope gets flatter as more of horiz. good is consumed

due to diminishing marg. Utility

  1. Higher CIC= higher Utility
  2. CIC's can't intersect

  • Indift. curves are parallel (don't intersect)
  • Higher indiff.curve = higher utility
  • Locations of PPE (dist. from oniqin) det. by total resources (labor) a country has
  • consumers always prefer more to less
  • as long as consumer gets more, utility and indiff Curve must go up

  • indiff. curves can be close or far (depending on inc. in un., small or discrete)
  • Ricardian Model-England

Labor

England

Portugal

1yd cloth

1 laborer

1 laborer

1 barrel wine

4 laborers

2 laborers

Eng - 80 laborers

ptD - complete specialization

Import : gap b/w dom. Consumption and dom prod.

Exp[ort: gap b/w dom. prod and dom consumption

  • Sm country assumption: takes world price as given fixed .
  • World rel. price (opp. cost) must lie blow 2 dom. rel. prices (opp. costs) for both countries to gain from trade
  • complete specialization (PPF is straight line)
  • Gains from trade attain higher indiff. curves

England

  • Since an opp. cost of prod a good = rel. price of that good:
  • Eng. exports cloth, gain per un. of exp. Cloth
  • This is extra amount of wine you can get by trading

Portugal

  • world-Portugal = 3 - 2 = 1 yd of cloth for every barrel of wine
  • Extra amount of cloth gained from trade

Note of Caution

  • In on comp. Adv. can be given in many ways
  • Pay attn to how it is presented

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