Input Method

• Men, women, and time needed.

My wife is good at ironing while I am good at changing tires

To iron 1 shirt To change one tire

women 6 20

men 10 15

• Minutes needed to produce

• What does this graph immediately tell you?

Women are better at everything therefore I should sit on the couch while my wife works

To iron 1 shirt To change one tire

women 8 4

men 12 9

• Minutes needed to produce

Women are better at everything therefore I should sit on the couch while my wife works

To iron 1 shirt To change one tire

women 8 4

men 12 9

• Minutes needed to produce

• To iron 1 shirt women give up 2 tire changes• To iron 1 shirt men give up 1 1/3 tire changes • To change 1 tire women give up 1/2 a shirt ironed• To change 1 tire men give up 3/4 a shirt ironed

Absolute and Comparative Advantage• A person or nation has an

absolute advantage when it can produce a particular good at a lower cost than another person or nation.

• Comparative advantage is the ability of one person or nation to produce a good at a lower opportunity cost than that of another person or nation.

The law of comparative advantage states that nations are better off when they produce goods and services for

which they have a comparative advantage in supplying.

Output method

• UK • China

Cheese and Cars; A simple world

One Car One ton Chz

UK

CHN

• Units produced per unit of production

• To make one car the UK gives up• To make one ton of chz the UK gives up• To make one car China gives up• To make one ton of chz China gives up

Comparative AdvantageCountry Shoes Op Cost

of ShoesCloth Op Cost

of Cloth

China 3 12

India 2 5

Comparative AdvantageCountry Shoes Op Cost

of ShoesCloth Op Cost

of Cloth

China 3 4 cloth 12 1/4 shoe

India 2 2 ½ cloth 5 2/5 shoe

Comparative AdvantageCountry Shoes Op Cost

of ShoesCloth Op Cost

of Cloth

China 3 4 cloth 12 1/4 shoe

India 2 2 ½ cloth 5 2/5 shoe

Country rice Op Costof rice

computers Op Costof Computers

Japan

Taiwan