ECON201, Maclachlan, Fall Some Tools of Economists Chapter 2

ECON201, Maclachlan, Fall The Production Possibilities Frontier

ECON201, Maclachlan, Fall A Shift in the Production Possibilities Frontier

ECON201, Maclachlan, Fall What’s the alternative to trade? David Thoreau at Walden Pond.

ECON201, Maclachlan, Fall On a national level: autarky A policy of national self-sufficiency and nonreliance on imports or economic aid.

ECON201, Maclachlan, Fall Mercantilism A country should aim to run trade surpluses and increase its monetary assets.

ECON201, Maclachlan, Fall Adam Smith ( ) Critic of mercantilism. Countries should specialize and trade. Specialize where there’s an ABSOLUTE ADVANTAGE

ECON201, Maclachlan, Fall David Ricardo ( ) Theory of comparative advantage. Even without an absolute advantage a region can trade to the benefit of all parties.

ECON201, Maclachlan, Fall Productivity Information Time to update webpage. Time to repair a bicycle. Paula20 minutes10 minutes Beth30 minutes

ECON201, Maclachlan, Fall Productivity and Opportunity Cost Time to update webpageTime to repair bike Paula20 minutes10 minutes Beth30 minutes Opportunity cost of webpage update Opportunity cost of bike repair Paula2 bike repairs? Beth??

ECON201, Maclachlan, Fall Productivity and Opportunity Cost Time to update webpageTime to repair bike Paula20 minutes10 minutes Beth30 minutes Opportunity cost of webpage update Opportunity cost of bike repair Paula2 bike repairs0.5 webpage updates Beth??

ECON201, Maclachlan, Fall Productivity and Opportunity Cost Time to update webpageTime to repair bike Paula20 minutes10 minutes Beth30 minutes Opportunity cost of webpage update Opportunity cost of bike repair Paula2 bike repairs0.5 webpage updates Beth1 bike repair1 webpage update

ECON201, Maclachlan, Fall Why some countries have been slow to specialize In the lone houses and very small villages which are scattered about in so desert a country as the Highlands of Scotland, every farmer must be butcher, baker and brewer for his own family. --Adam Smith, 1776