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

Principles of Macroeconomics

by: Hallie Kuphal

Principles of Macroeconomics ECON 1010

Marketplace > University of Wyoming > Economcs > ECON 1010 > Principles of Macroeconomics
Hallie Kuphal
GPA 3.74


Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

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

Class Notes
25 ?




Popular in Course

Popular in Economcs

This 10 page Class Notes was uploaded by Hallie Kuphal on Wednesday October 28, 2015. The Class Notes belongs to ECON 1010 at University of Wyoming taught by Staff in Fall. Since its upload, it has received 14 views. For similar materials see /class/230363/econ-1010-university-of-wyoming in Economcs at University of Wyoming.


Reviews for Principles of Macroeconomics


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: 10/28/15
Burgess Principles of Macro Economics Econ 10101 1 Topic 3 Interdependence and the Gains from Trade 1What are the Benefits of Trade Case Study Example The Production Opportunities of a Farmer and a Rancher Self Sufficiency Specialization and Trade 2The Principle of Comparative Advantage Absolute Advantage Comparative Advantage Case Study Example Comparative Advantage and Trade Summary 3Applications of Comparative Advantage 4 Summary Burgess Principles of Macro Economics Econ 10101 2 1 What are the Benefits from Trade Economics is the study of how societies produce and distribute goods in an attempt to satisfy the wants and needs of its members How do we satisfy our wants and needs in a global economy oWe can be economically selfsufficient oWe can specialize and trade with others leading to economic interdependence Individuals and nations rely on specialized production and exchange as a way to address problems caused by scarcity Burgess Principles of Macro Economics Econ 10101 This gives rise to two questions oWhy is interdependence the norm oWhat determines production and trade Interdependence occurs because people are better off when they specialize and trade with others Patterns of production and trade are based upon differences in opportunity costs Burgess Principles of Macro Economics Econ 10101 4 11 Case Study Example The Production Opportunities of a Farmer and a Rancher 0 Assume only two goods potatoes and meat only two people a potato farmer and a cattle rancher o What should each produce o Why should they trade 12 SelfSufficiency By ignoring each other o Each consumes what they each produce o The production possibilities frontier is also the consumption possibilities frontier Without trade economic gains are diminished 13 Specialization and Trade Each would be better off if they specialized in producing the product they are more suited to produce and then trade with each other Burgess Principles of Macro Economics Econ 10101 2 The Principle of Comparative Advantage o Who should produce What o How much should be traded for each product This depends on the differences in the costs of production o The number of hours required to produce a unit of output for example one pound of potatoes o The opportunity cost of sacrificing one good for another Burgess Principles of Macro Economics Econ 10101 21 Absolute Advantage oDescribes the productivity of one person firm or nation compared to that of another oThe producer that requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good 22 Comparative Advantage oCompares producers of a good according to their opportunity cost oThe producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good Burgess Principles of Macro Economics Econ 10101 23 Case Study Example Comparative Advantage and Trade oWho has the absolute advantage The farmer or the rancher oWho has the comparative advantage The farmer or the rancher Absolute Advantage oThe Rancher needs only 8 hours to produce a pound of potatoes Whereas the Farmer needs 10 hours oThe Rancher needs only 1 hour to produce a pound of meat Whereas the Farmer needs 20 hours Comparative Advantage oThe Rancher s opportunity cost of a pound of potatoes is 8 pounds of meat Whereas the Farmer s opportunity cost of a pound of potatoes is 12 pound of meat oThe Rancher s opportunity cost of a pound of meat is only 1 8 pound of potatoes While the Farmer s opportunity cost of a pound of meat is 2 pounds of potatoes Burgess Principles of Macro Economics Econ 10101 24 Summary oComparative advantage and differences in opportunity costs are the basis for specialized production and trade oWhenever potential trading parties have differences in opportunity costs they can each benefit from trade Therefore trade can benefit everyone in a society because it allows people to specialize in activities in which they have a comparative advantage Burgess Principles of Macro Economics Econ 10101 9 3 Applications 31 Adam Smith and Trade In his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations Adam Smith performed a detailed analysis of trade and economic interdependence which economists still adhere to today 32 David Ricardo and Trade In his 1816 book Principles of Political Economy and Taxation David Ricardo developed the principle of comparative advantage as we know it today 33 Should Tiger Woods Mow His Own Lawn 34 Should the United States Trade with other Countries Burgess Principles of Macro Economics Econ 10101 10 4 Summary olnterdependence and trade allow people to enjoy a greater quantity and variety of goods and services oThe person who can produce a good with a smaller quantity of inputs has an absolute advantage oThe person with a smaller opportunity cost has a comparative advantage oThe gains from trade are based on comparative advantage not absolute advantage oComparative advantage applies to countries as well as to people


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

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Allison Fischer University of Alabama

"I signed up to be an Elite Notetaker with 2 of my sorority sisters this semester. We just posted our notes weekly and were each making over $600 per month. I LOVE StudySoup!"

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."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

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.