Lecture Notes: Introduction to Economics Class

Class Requirements and Housekeeping

• Weekly Assignments:

  • Module readings and quizzes are due every Monday.
  • Next week: Module 2 quiz and Module 3 reading are due.

• Module Materials:

  • Module readings are uploaded after Thursday class.
  • Practice problems and slides (skeleton version) are available.

• Collaborative Learning (CL) Sessions:

  • Assigned to undergraduate instructors (UGIs).
  • CL sessions help in exploring practice problems and solutions.
  • Attendance earns extra credit (0.25% per week, up to 3% for the semester).

Technical Issues

• Microsoft apps update may cause delays in opening materials.
• Syncing issues with Canvas and Top Hat; updates occur post-due date.

Key Concepts

Production Possibilities Curve (PPC)

• Definition: Illustrates all possible combinations of two goods that can be produced using all available resources.
• Assumptions: Limited resources (e.g., labor hours), production focused on two goods.
• Example:
  • 50,000 labor hours.
  • Computers require 100 hours each, wheat 10 hours per ton.
  • Extreme Points:
    • 500 computers or 5,000 tons of wheat.

Opportunity Cost

• Cost of X-axis Good: Absolute value of the PPC slope.
• Cost of Y-axis Good: Inverse of the slope.
• Example Calculation:
  • Change in Y: 5,000 to 0 (change = -5,000).
  • Change in X: 0 to 500 (change = 500).
  • Slope = -10, Cost of one computer = 10 tons of wheat.

Comparative and Absolute Advantage

• Absolute Advantage: Ability to produce more of a good using fewer resources.
• Comparative Advantage: Ability to produce a good at a lower opportunity cost.

Example:

• CEO vs. Mechanic fixing a car.
• CEO has absolute advantage (1 hr vs. 3 hrs) but not comparative advantage due to high time value.

International Trade and Comparative Advantage

• Example Countries: U.S. and India producing iPhones and aircraft parts.
  • USA has an absolute advantage in both.
  • India has a comparative advantage in iPhones, USA in aircraft parts.
• Trade Terms:
  • Trade occurs if exchange rate is between opportunity costs.
  • U.S. aircraft part cost: 2 iPhones.
  • Indian iPhone cost: 0.2 aircraft parts.

Gains from Trade

• Pre-Trade vs. Post-Trade Comparison:
  • Both countries are better off post-trade.
  • Trade allows specialization based on comparative advantage.

Questions & Considerations

• Address questions during lectures.
• Encourage student interaction and queries.
• Use of Canvas for in-class quizzes to avoid Wi-Fi issues.

These notes summarize the lecture focusing on understanding the basics of production possibilities, opportunity costs, and comparative and absolute advantage in both national and international contexts. Always refer to lecture slides and class materials for detailed explanations and examples.