-individual: exists when a person can produce more of a certain good/service than someone else in the same amount of time
-national: exists when a country can produce more of a good/service than another country can in the same time period
Comparative advantage:
-individual/national: exists when an individual or nation can produce a good/service at a lower opportunity cost than can another individual or nation
Input problems: the country/individual that uses the least amount of resources, land or time, has the absolute advantage
Output problems: country/individual that can produce the most has the absolute advantage
The country/individual that has the lowest opportunity cost has the comparative advantage in that product
(in some format it deals with production)
Absolute advantage: faster, more, more efficient
Comparative advantage: lower opportunity cost
Heres a practice problem.
Great blog! I didn't find the formulas for input and output.
ReplyDeleteInput: chosen item/forgone item
Output: what they give up/ what is produced
It really helped me to understand the difference when you added your examples. I think it would further my understanding if you went through the problem presented.
ReplyDeletegreat, detailed, and informative. great use of an example as well. i say perhaps a different note format would make this overall easier to read
ReplyDelete