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Chap. 2 Notes, Part 2

by: Ja'kayla davis

Chap. 2 Notes, Part 2 Econ. 222

Ja'kayla davis
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About this Document

These cover the second part of chapter 2 for exam 1
Principles of Macroeconomics
Dr. Chandini
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This 1 page Class Notes was uploaded by Ja'kayla davis on Thursday February 25, 2016. The Class Notes belongs to Econ. 222 at University of South Carolina taught by Dr. Chandini in Spring 2016. Since its upload, it has received 24 views. For similar materials see Principles of Macroeconomics in Economcs at University of South Carolina.

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Date Created: 02/25/16
Chap. 2 Notes… Part 2 Comparative Advantage, Absolute Advantage, and Specializations from - How can we determine the gains from specialization and trade? 1. Overall Goal: Find which party has the lower oppt. Cost for producing a good.; use the following process even if someone has a comparative advantage for both goods. i. Why? B/c they usually only slightly better in production of one good than the other party and way better at production of another good (hence what they should produce) 2. Example: See lect. Notes i. Process: a. Equalize time for each good’s production b. Set the good amounts equal to each other c. Solve for either good in terms of the opportunity cost of the other - What is the overall takeaway from gains from trade? 1. Economic units (households, firms, and countries) are better off materially by doing two things: i. Producing goods and services they hold competitive advantage in ii. Obtaining goods and services by trade for which they do not hold a competitive advantage 2. Specialization and trade increase both: 1) total production, and 2) total consumption i. Importantly: Allows individuals and countries to consume at points beyond their ppfs (unattainable production points).


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