Tell me what that state specializesin:

Idaho PotatoesFlorida OrangesTexas Oil or cattleMichigan AutomobilesNevada Any illegal activity that

you can think of

Absolute and Comparative Advantage

Betty types 120 w.p.m. with 0 errorsJim types 60 w.p.m. with 0 errorsWho should do the typing, Betty or Jim?

Betty. Why?Betty can type ABSOLUTELY faster thanJim can. What type of advantage doesBetty have over Jim?

Absolute Advantage

I forgot to tell you--Betty is a lawyer.

A lawyer earns $60 an hour.A secretary earns $6 an hour.

A 600-word document has to be typed, how long does it take eachperson to type this document?

Betty is the lawyer. According tothe information given, that makesJim-- A secretary.

It takes Betty 5 minutes to type the document, and it takes Jim 10 minutes to type the document.

Based on hourly rates and time to type, it would cost Betty $5 to type the document, and it costs Jim $1 to type the document.

According to this information, whoshould do the typing? Jim

Why should Jim do the typing?

Because he has a--

Comparative AdvantageOne entity can produce somethingat a LOWER OPPORTUNITYPRODUCTION COST than anotherentity

Five minutes ago you told me thatBetty should do the typing; now youare telling me that Jim should dothe typing. Why?

Because Jim has the comparativeadvantage.

Which is more important in economics--absolute or comparative advantage?

Comparative Advantage

-U.S. call centers are ABSOLUTELY the best for English speakers. Why then, are thecall centers all moving to India where they struggle with the English language and drive us crazy when we call?

India has a COMPARATIVE advantage. Compared to their American counterparts,

Indian operators get the job ‘done’ at a much lower opportunity cost.

American workers are thus free to do more lucrative jobs.

India United States

The Law of Comparative Advantage infers that

international trade is a natural phenomenon. BUT…

…does trade with China, Mexico, etc. hurt the United States or help it?

Top US ImportsCrude oil … US$188.5 billionMedicinal, dental and pharmaceutical preparations … $81.4 billionPassenger cars … $80.9 billionOther household goods (example: clocks) … $60.3 billionComputer accessories … $53.2 billionAutomotive parts and accessories … $47.3 billionCotton apparel and household goods … $43.9 billionComputers … $40.8 billionTelecommunications equipment … $37.3 billionVideo equipment (example: television receivers, DVDs) … $36.1 billion

Buying American?

65% made in USA 90% made in USA

Top US ExportsCivilian aircraft including parts … US$74.7 billionMedicinal, dental and pharmaceutical preparations … $46.1 billionSemiconductors … $37.5 billionOther industrial machines … $30.9 billionAutomotive parts and accessories … $30 billionTelecommunications equipment … $28.7 billionPassenger cars … $27.5 billionMedicinal equipment … $26.9 billionElectric apparatus … $26.1 billionPlastic materials … $25.5 billion

Tim Cook: China will be Apple's top market

By Charles Riley @CNNMoneyTech January 11, 2013

CATTLE IN JAPAN!

China Germany

How long does it take Betty to typethis document?

How long does it take Jim to typethis document?

5 minutes

10 minutes

600 divided by 120 = 5

600 divided by 60 = 10

How much would it cost each oneto type this 600-word document?

Betty

Jim

$5

$1

Betty receives $60 an hour or $1 per minute. It takes her 5 minutes to type the document.

Jim receives $6 an hour or $1 forevery 10 minutes. It takes him 5 minutes to type the document.