Comparative_Advantage

Comparative Advantage Comparative advantage is best described through the production possibility curve. Row % of resources devoted to production of guns Number of guns % of resources devoted to production of bread Pounds of bread A 0 0 100 15 B 20 4 80 14 C 40 7 60 12 D 60 9 40 9 E 80 11 20 5 F 100 12 0 0 (a). Production Possibility Table (b) Production Possibility Curve Bread Guns The production table contains information on the trade-off between the production of guns and bread. The information is plotted on the graph (b). As we move along the P.P curve from A to F trading bread for guns, we get fewer and fewer guns for each pound of bread and fewer guns for each pound of bread given up. That is, the opportunity cost of choosing guns over bread increases as we increase the production of guns. This concept is called the principle of increasing marginal opportunity cost. This occurs because some resources are better suited for the production of bread that for the production of guns. Putting it in economists’ terminology we would say that some resources have a comparative advantage over other resources. (Colander) In definition comparative advantage means the ability to be better suited to the production of one good than to the production of another good. In this example, some resources have a comparative advantage over other resources in the production of production, comparative, advantage, resources, guns, bread, problems, algebra, solved, producing, possibility, good, trade, one, four, day, curve, better, statistic, over, fewer, each, devoted, combined, colander, carmen, carlos, whiz, table, suited, strengths, statistics, specialize, solve, problem, probability, pound, possibilities, people, opportunity, off, markets, information, individuals, example, daily, cost, both