1. ECON201, Maclachlan, Fall 20071 Some Tools of Economists Chapter 2

2. ECON201, Maclachlan, Fall 20072 The Production Possibilities Frontier

3. ECON201, Maclachlan, Fall 20073 A Shift in the Production Possibilities Frontier

4. ECON201, Maclachlan, Fall 20074 What’s the alternative to trade? David Thoreau at Walden Pond.

5. ECON201, Maclachlan, Fall 20075 On a national level: autarky A policy of national self-sufficiency and nonreliance on imports or economic aid.

6. ECON201, Maclachlan, Fall 20076 Mercantilism A country should aim to run trade surpluses and increase its monetary assets.

7. ECON201, Maclachlan, Fall 20077 Adam Smith (1723-1790) Critic of mercantilism. Countries should specialize and trade. Specialize where there’s an ABSOLUTE ADVANTAGE

8. ECON201, Maclachlan, Fall 20078 David Ricardo (1772-1823) Theory of comparative advantage. Even without an absolute advantage a region can trade to the benefit of all parties.

9. ECON201, Maclachlan, Fall 20079 Productivity Information Time to update webpage. Time to repair a bicycle. Paula20 minutes10 minutes Beth30 minutes

10. ECON201, Maclachlan, Fall 200710 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??

11. ECON201, Maclachlan, Fall 200711 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??

12. ECON201, Maclachlan, Fall 200712 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

13. ECON201, Maclachlan, Fall 200713 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