Trade Creates Wealth

Trade creates wealth: strange b/c nothing new created at all
*Recall last example, Kirby Puckett =>"black box" => complete set
Trade = non-technical form of production
-some goods only produced when good exchanged across the globe (China's precious metal)


What exchange does: make cake or laptop with the goods swapped, now can sell for $

How Trade Can Make Us Richer In True Sense

* Mike and Rich have identical properties

	Mike	Rich
Weeding	80 min	120 min
Mowing	40 min	120 min
Total Yard Work Time	120 min	240 min

*Rich offers to weed 3/4 of Mike's yard if Mike mows Rich's yard

	Mike	Rich
New Labor Deal	+40 min to Mow Rich’s yard +40 min to mow own +20 min to weed rest of own yard	+90 min to weed Mike’s yard +120 min to weed own yard
New Total Yard Work   Time	100 min	210 min

*BOTH have less time doing yard work

Efficiency: getting more from stock of resources

Production Possibilities Frontier: Amount one can produce given resources, technology and knowledge

Properties of PPFs

1) All Points on/in = achievable

2) Absolute Advantage: Raw sense, one person/company better at producing a product than another

 ex: Rizzo better at making coon hats, but Mrs. Rizzo better at jibbiets

3) All points NE are NOT achievable

4) Points on the PPF are "productively efficient"

  --> key: produce stuff that people want at lowest cost; consider making the right amnt for demand

5) Slop; negative/downward; captures tradeoff

  -produce more of one, then must produce less of the other

6) Change in slope = "Law of Diminishing Return" 

 -aka law of increasing opportunity cost

 - lower quality when want to expand

7) Economic growth

   1- Resources (created or discovered)

   2- Technology

   3- Trade

Comparative Advantage

Rochester Grads vs. Cornell grads; who better at making wine and/or cameras?