Outline
1. Math Review
a. How to read a graph of a line?
b. How to graph a linear equation?
c. Slope of a curve
2. Production possibilities frontier (PPF)- shows combination of output that the
economy can possibly produce given the available factors of production and
available production technology.
PPF highlights the ideas of scarcity, efficiency, trade-offs, opportunity cost and
economic growth (Refer to the graphs in the lecture for the details.)
3. Gains from Trade
absolute advantage - the ability to produce a good using fewer inputs than another
producer
comparative advantage - the ability to produce a good at a lower opportunity cost
than another producer
A producer can still benefit from trade if he/she has no absolute advantage in any
of the products produced. Comparative advantage is what matters!
Tatevik Sekhposyan ( UNC-Chapel Hill) Introduction to Economics - Lecture 2 May 16, 2007 1 / 1
