Comparative and absolute advantage on Gilligan's Island.
Who proposed the theory of absolute advantage and in what year?
In the years 1700 by Adam Smith
Who proposed the theory of comparative advantage and in what year?
In the years 1800 by David Ricardo
What is the main difference between the two theories?
The difference is that in absolute advange one nation produces a lower direct cost (lower resources).And in comparative advantege, the advange is detemined by who produces at a lower indirect cost (opportunity).
In the example given in the video, who has the absolute advantage? Skipper or Guilligan?
Skipper has absolute advantage.
In the example given in the video who has the comparative advantage? Skipper or Guilligan?
Both, because skipper has comparative advantage in hut production and Guilligan has comparative advantage in fishing.
How could apply this concept to the economy of one country?
Global Economies Part II
1._Terms or concepts that are defined:
Comparative advantege: was first introuduce by david Ricardo and then is differences is in country resources output activities labors.
Economies of scale: makes production more efficient with level cost per unit output.
Opportunity cost: is forgone opportunity to produce another good.
2._Cause-effect relationships:
There are two reasons for the specialization and trade is consetive beneficial for countries. The first reason is the comparative advantege and the second reason is the economies of scale.
Comparative and absolute advantage on Gilligan's Island.
- Who proposed the theory of absolute advantage and in what year?
In the years 1700 by Adam Smith- Who proposed the theory of comparative advantage and in what year?
In the years 1800 by David Ricardo- What is the main difference between the two theories?
The difference is that in absolute advange one nation produces a lower direct cost (lower resources).And in comparative advantege, the advange is detemined by who produces at a lower indirect cost (opportunity).- In the example given in the video, who has the absolute advantage? Skipper or Guilligan?
Skipper has absolute advantage.- In the example given in the video who has the comparative advantage? Skipper or Guilligan?
Both, because skipper has comparative advantage in hut production and Guilligan has comparative advantage in fishing.Global Economies Part II
1._Terms or concepts that are defined:
Comparative advantege: was first introuduce by david Ricardo and then is differences is in country resources output activities labors.
Economies of scale: makes production more efficient with level cost per unit output.
Opportunity cost: is forgone opportunity to produce another good.
2._Cause-effect relationships:
There are two reasons for the specialization and trade is consetive beneficial for countries. The first reason is the comparative advantege and the second reason is the economies of scale.