Comparative Advantage (October 24th, 2011)

(Drawn graphs of Rochester and Cornell: Rochester makes 10 glasses of wine and 5 cameras, where as Cornell makes 3 glasses of win and 4 cameras.)

Rochester students have an absolute advantage at making cameras and wines. But which of these two universities make it efficient? What is the sacrifice?

Rochester makes 5 cameras for the cost of 10 wine bottles. It costs them 10 wine bottles to make 5 cameras. Therefore, the price of the camera is $2 worth of wine and the price of the wine is $0.50 worth of a camera.

Cornell makes 4 cameras for the cost of 3 wine bottles. They can also make 1 camera for the cost of 3/4th's of a wine bottle. Therefore, the price of a camera is $3/4th the worth of a wine bottle and the price of a wine bottle is $4/3rd worth of a camera.

• Rochester has a "comparative advantage" in making wine over Cornell.
• Comparative Advantage is the ability to produce something without as much of a sacrifice as the other place. What is made is made efficient and cheap in comparison to someone else.
• Nobody can have a comparative advantage over everyone. 

If Rochester initially made 10 wine bottles and 0 cameras and Cornell made 0 wine bottles and 4 cameras and they decided to trade 3 of each, such that Rochester gained 3 cameras from Cornell and Cornell gained 3 wine bottles from Rochester.
Then the final product will be 7 wine bottles and 3 cameras for Rochester and 3 wine bottles and 1 camera for Cornell.

This creates a change in the graph known as the PPF ( Production Possibility Frontier).
Economical sustainability from retaining more of an output. You can pay for your exports with your iimports always!

Individuals are the entities and should not be grouped with vague statements (Rochester is in western New York, so Western New York is good at making wine.) That statement is incorrect.

Failures

1. There is self-sufficiency, which is the road to poverty.
2. Function of productivity in each country, such as the United States and China.
3. Policies that restrict people from trading will make people poorer.

The Boosting Outputs

1.  Workers have been replaed by techonology.
2. What we import today is technologically heavy.
3. High school jobs stay and shall allow jobs to leave the area.
4. The jobs are more pleasent than what it was before.
5. We have lots of skilled laborers.