Micro and Macro Models Purdue University微观和宏观模型普渡大学.pptVIP

Micro and Macro Models Agec 217 Micro and Macro Models Terms (almost all not involving money) Opportunity Cost Absolute Advantage Comparative Advantage Specialization Production Possibility Frontier Imports Exports Circular Flow Diagram Opportunity Cost Opportunity Cost: The next best alternative you give up in order to obtain or produce an item Opportunity Cost What would you be doing if you were not in class today? Opportunity Cost Opportunity cost for each of three identical jobs with identical benefits, but with employers paying different salaries: Employer A: $70,000 Employer B: $50,000 Employer C: $30,000 Absolute and Comparative Advantage Two individuals, Kate and Charlie, are stranded on a desert island and subsist on a diet of bananas and coconuts. Absolute and Comparative Advantage Production per Hour Bananas Kate: 40 per hour Charlie: 20 per hour Coconuts Kate: 20 per hour Charlie: 4 per hour Absolute and Comparative Advantage Absolute Advantage: The person, firm, or nation with a higher level of productivity compared to that of another. Absolute and Comparative Advantage Kate has the absolute advantage producing both bananas and coconuts Absolute and Comparative Advantage Who has the comparative advantage? Comparative Advantage: the person, firm, or nation with the lower opportunity cost vs. that of another. Absolute and Comparative Advantage Calculating opportunity cost (the next best alternative) Opportunity cost of producing bananas = the number of coconuts produced in a unit of time divided by the number of bananas produced in the same unit of time. Absolute and Comparative Advantage Opportunity Cost Bananas Kate: ? coconut Charlie: 1/5 coconut Coconuts Kate: 2 bananas Charlie: 5 bananas Absolute and Comparative Advantage Let’s assume that each is eating only their own production in the following manner: Kate: 20 bananas and 10 coconuts Charlie: 10 bananas and 2 coconuts Are there any shifts in production or trades that could be ta