New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Econ 202 Week 2 Notes

by: Sydney Dingman

Econ 202 Week 2 Notes Econ202

Marketplace > Colorado State University > Economcs > Econ202 > Econ 202 Week 2 Notes
Sydney Dingman
GPA 3.7

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Covers Tuesday/Thursday lecture material
Principles of Microeconomics
Professor Christopher Blake
Class Notes
Economics, Microeconomics
25 ?




Popular in Principles of Microeconomics

Popular in Economcs

This 5 page Class Notes was uploaded by Sydney Dingman on Thursday January 28, 2016. The Class Notes belongs to Econ202 at Colorado State University taught by Professor Christopher Blake in Winter 2016. Since its upload, it has received 29 views. For similar materials see Principles of Microeconomics in Economcs at Colorado State University.


Reviews for Econ 202 Week 2 Notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 01/28/16
Week 2 Econ202 Notes 1/26/16 Module 3 Ice crea D m A B C Beer  Three economic concepts in the PPF o Efficiency o Economic Growth o Opportunity Cost  Efficiency: o Efficiency: Producing the most output possible, given our inputs (resources) o On PPF at points like A & B, our production level is attainable and efficient o Inside the PPF ( C ), the production level is attainable but inefficient o Outside the PPF (D), our production level is unattainable given current resources and technology but, could become attainable in the future  Economic Growth o Economic Growth is the expansion of an economy’s ability to produce goods or services o Visually, one or more intercepts on the PPF shifting o Sources of economic growth:  Increase in resources (land, labor, capital, entrepreneurship  Improvement in technology o EX. Technological improvement in beer manufacturing o Redraw the PPF graph with beer at 60 instead of 40  Opportunity Cost o Opportunity Cost: What we are giving up to get something else o Visually, our opportunity cost is going to be represented by the slope of the PPF  The steeper the slope, the higher the opportunity cost o Because we have drawn PPF as a straight line, we assume the opportunity cost is constant  We have assumed, we are always giving up one good or service in order to get another  This is not realistic, because it assumes all resources are equally able to produce each good or service o Steps for calculating opportunity cost  Set end points equal  30 ice cream = 40 beer  Solve each side for 1  Opportunity cost of ice cream: Divide both sides by 30; o 1 ice cream = 4/3 beer o In order to produce one ice cram, we must give up 4/3 of a beer  Opportunity cost of beer: divide both sides by 40 o ¾ ice cream = 1 beer o In order to produce one beer, we must give up ¾ of an ice cream  More realistic example: Coconu ts Fish  Increase opportunity costs 2 o For example, boxes wash up on shore with a net, a spear, baseball bat o From A to B, place net to fish and spend the rest of the day collecting coconuts o Opportunity costs increase because certain resources are better suited to produce certain goods and services than other 1/26/16, Module 4  Comparative Advantage  Goal: show that two parties who can benefit from specialization and trade o Specialization: idea that we want to focus our efforts and/or resources to produce one type of good or service  Conceived by Adam Smith originally, was the founder of modern economics  Wealth of Nations (1776): tells a story of a pin factory, by specializing, we could see how production would increase quite a bit. (e.g. sharpening the pin, putting hole for thread, putting ball on it.)  Example: Russia and Zimbabwe produce some combination of coffee and apple pie o Separate graphs for Zimbabwe and Russia with coffee on the x- axis and apple pie on the y.  If Russia devotes all resources to apple pie, they can make 100 pies and 50 coffees  If Zimbabwe devotes all resources to apple pie, they can make 40 pies and 40 coffees o Comparative advantage- you have a comparative advantage in something if your opportunity cost of producing it is lower than someone else’s  We should specialize in production of the G/S for which we have a comparative advantage  Forms the basis for gains from trade o Calculate opportunity cost for each country  Russia: 100 pies=50 coffees… 1 pie=1/2 coffee, 1 coffee=2 pies 3  Gives up less coffee for each apple pie  Zimbabwe: 40 pies=40 coffees… 1 pie=1 coffee, 1 coffee=1 pie  Gives up less pie for each coffee o Russia has a comparative advantage in apple pie production and Zimbabwe does in coffee  Show a trade where both economies consume a bundle outside their PPF  If Russia devotes all resources to apple pie, they can make 100 pies and 50 coffees  Therefore, Russia should only produce apple pie.  The point at 100 represents the production before trade  If Zimbabwe devotes all resources to apple pie, they can make 40 pies and 40 coffees  Therefore, Zimbabwe should only produce coffee.  The point at 40 represents the production before trade  Terms of Trade: determines ratio of trade between both economies, agreement between two economies where they decide how many apple pies each coffee is worth and they trade that amount o Zimbabwe has goal of getting as many apple pies per coffee as possible, but cannot ask for more than 2 apple pies per coffee. o Zimbabwe will need at least one apple pie per coffee to make the trade beneficial o Terms of trade are mutually beneficial if it falls between the opportunity costs of the two economies  Each coffee traded for between 1 and 2 apple pies  EX. Terms are set at 1 coffee=1.5 apple pies o Trade 30 coffees for 45 apple pies  Russia has 55 apple pies and 30 coffees after trade, this point is the consumption after trade  Zimbabwe has 10 coffees and 45 apple pies after trade, this point is their consumption after trade 4 o Through this trade, both economies consume outside of their PPF, which means they are better off than they would be on their own.  Absolute advantage: the idea that some economy can produce more when they specialize than other economies o Russia has absolute advantage in both G/S o Even if this is true, gains from trade can still exist. o This advantage has no bearing on gains from trade 5


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Jennifer McGill UCSF Med School

"Selling my MCAT study guides and notes has been a great source of side revenue while I'm in school. Some months I'm making over $500! Plus, it makes me happy knowing that I'm helping future med students with their MCAT."

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.