Unit 7: Comparitive and Absolute Advantage

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Absolute Advantage: who can produce more with the same resources or who can produce the same output with fewer resources

Comparative Advantage: who can produce with the lowest opportunity cost

Input and Output is a way to measure productivity

Input vs. Output

Output

  • tons per acre, miles per gallon, words per minute, apples per tree, computers produced per hour, etc
Input
  • # of hours to do a job, # of gallons of paint to paint a house, # of acres to feed a horse
Output Problem: what they give up over what they produce
Input Problem: input that is dedicated to the chosen  over input that is dedicated to the forgone item 

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