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If there is no trade,
each person’s production possibilities frontier is also his or her consumption possibilities frontier.
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20
A Parable for the Modern Economy
possibly produce – Given the available
• Factors of production • Production technology
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9
Example:
Two goods: computers and wheat
One resource: labor (measured in hours)
Panel (a) shows the production opportunities available to the farmer and the rancher.
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The Production Possibilities Frontier (b, c)
(b) The farmer’s production
Trade can make people better off! -------people can gain from trade!
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model: Production possibilities frontier(PPF)
– A graph – Combinations of output that the economy can
countries’economic policy
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Requirements:
1)Absence is not allowed; 2)Parts of the book are your task; 3) Try to be active in class
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3
※ Topic 1:What is trade?
24
consumption.
If there is no trade, the rancher chooses this production and consumption.
8
4
A
12
B
0
16
32
0
Potatoes (oz)
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48
Potatoes (oz)
Panel (b) shows the combinations of meat and potatoes that the farmer can produce. Panel (c) shows the combinations of meat and potatoes that the rancher can produce. Both production possibilities frontiers are derived assuming that the farmer and rancher each work 8 hours per day.
Economy has 50,000 labor hours per month available for production
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※Production possibilities frontier :
Various mixes of output that an economy can produce
• Specialization and trade
– Farmer – specialize in growing potatoes
• More time growing potatoes • Less time raising cattle
– Rancher – specialize in raising cattle
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﹟The activity of buying ,selling or exchange goods within a country or between countries
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Abenomics: devalue JPY
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※ Topic 2: reasons of trade( or international trade ):
The proposed trade between the farmer and the rancher offers each of them a
• More time raising cattle • Less time growing potatoes
– Trade: 5 oz of meat for 15 oz of potatoes – Both gain from specialization and trade
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How Trade Expands the Set of Consumption Opportunities (c)
(c) The rancher’s production
possibilities frontier Meat (oz)
possibilities frontier Meat (oz)
If there is no trade, the farmer
chooses this production and
Chapter 1 Introduction
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1
※ The importance of this lesson
• Help you understand the international world in which you are involved in
• Help you make the economic decisions • Help you understand the potentials and the limits of
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16
A Parable for the Modern Economy
• Only two goods
– Meat – Potatoes
• Only two people
– Rancher – Farmer
Hale Waihona Puke .1717
The Production Possibilities Frontier (a)