Chapter 6 CHOICES AND TRADE. NTErnaTIONAL ECONOMICS
Chapter 6 CHOICES AND TRADE: INTERNATIONAL ECONOMICS
6.1 THE ORIGINS OF TRADE 冷 Assumption c62 goods: meat &potatoes o6 2 people: cattle rancher potato farmer Situation s rancher can produce only meat and farmer can produce only potatoes s rancher and farmer are each capable of producing the other good, but only at great cost
6.1 THE ORIGINS OF TRADE ❖ Assumption 2 goods: meat &potatoes 2 people: cattle rancher & potato farmer ❖ Situation rancher can produce only meat and farmer can produce only potatoes. rancher and farmer are each capable of producing the other good, but only at great cost
6.2 PRODUCTION POSSIBILITIES
6.2 PRODUCTION POSSIBILITIES
1. The Production Opportunities of the farmer and the rancher Minutes Needed to make Amount of meat or 1 Ounce of Potatoes Produced in 8 hours Meat Potatoes Meat Potatoes Farmer 60 min/oz 15 min/oz8oz 320z Rancher 20 min/oz 10 min/oz 24 oz 480z
1. The Production Opportunities of the Farmer and the Rancher Minutes Needed to Make 1 Ounce of Amount of Meat or Potatoes Produced in 8 hours Meat Potatoes Meat Potatoes Farmer 60 min/oz 15 min/oz 8 oz 32 oz Rancher 20 min/oz 10 min/oz 24 oz 48 oz
2. The Production possibilities frontier a)Farmers PPF (b)Ranchers Meat Meat (ounce) If there is no trade, (ounce) If there is no trade the farmer chooses the rancher chooses this production and 24 this production and consumption 8 consumption A 12 16 32 Potatoes 24 48 Potatoes (ounce) (ounce)
2.The Production Possibilities Frontier Meat (ounce) Potatoes (ounce) 8 4 0 16 32 A Potatoes (ounce) 24 12 0 24 48 Meat (ounce) (a) Farmer’s PPF (b) Rancher’s PPF B If there is no trade, the farmer chooses this production and consumption. If there is no trade, the rancher chooses this production and consumption