Comparative advantage

Intros
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Lessons
  1. Types of Advantages
    • Comparative advantage
    • Absolute advantage
  2. Solving Comparative Advantage Problems
    • Set up a table
    • Compute opportunity costs
    • Circle the lowest opportunity costs
    • Define who should produce what
    • An Example
Examples
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Lessons
  1. Solving Comparative Advantage and Absolute Advantage Problems
    In an hour, Bella can produce 30 drawings or 5 books and Billy can produce 2 drawings or 20 books.
    1. Calculate Bella's opportunity cost of producing a drawing and a book?
    2. Calculate Billy's opportunity cost of producing a drawing and a book?
    3. Who has the comparative advantage in drawings and in books? What should Billy and Bella specialize in?
  2. In an hour, Kevin can produce 2 computers and 5 laptops and Luke can produce 2 computers and 10 laptops
    1. Calculate Kevin's opportunity cost of producing a laptop?
    2. Calculate Luke's opportunity cost of producing a laptop?
    3. Who has the comparative advantage in producing laptops?
    4. If Kevin and Luke specialize in producing goods in which each of them has a comparative advantage in, and they trade 1 computer and 3 laptops, who gains from the specialization and trade?
  3. Suppose Kevin buys a new machine that lets him create 10 computers an hour. Who has the comparative advantage in making computers?