Class Lecture #21 - 10/21

1.) Trade creates nothing new, yet it benefits BOTH parties.....
                Time to do Yardwork                                         
                     Mike:               Rich:
weeding       80 min.             120 min.
mowing       40 min.              120 min.
                    120 min.             240 min.

...Rich offers to weed 3/4 of Mike's driveway if Mike mowes Rich's yard.
                Time to Do Yardwork
                     Mike:                Rich:
weeding       20 min.              210 min.
mowing       80 min.               0 min.  
                     100 min.           210 min.

Both parties benefit. Trade is for this reason, very efficient.

2.) Production Possibilities Frontier
        - given resources, education, technology
        - Properties of PPF's:
             (1) all points on or in the curve are achievable
             (2) "absolute advantage" = individual's ability to produce something
             (3) all points outside of curve NOT achievable
             (4) points on the PPF are productively efficient (right combination/point on the curve is economically efficient)
             (5) Slope.... more coonskin hats, less jibbits... tradeoffs
             (6) Change in slope = "Law of Diminishing Returns" or increasing opportunity costs
             (7) Economic Growth.....

3.) Economic Growth happens when successful production lies on a point outside of curve. Growth happens because of:
        - increase in/better resources
        - better technology
        - TRADE