曼昆经济学原理Chapter 3

2
A Parable for the Modern Economy
• A simple model (gains from trade)
– Principle 5: Trade can make everyone better off
• Assume only two goods
– Meat – Potatoes
• Both can consume more of both goods
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Figure 1
The Production Possibilities Frontier (b, c)
(b) The farmer’s production possibilities frontier Meat (oz)
If there is no trade, the farmer chooses this production and consumption.
(b) The rancher’s production and consumption Meat (oz)
• As given in the next slide
• Assume constant rate of transformation (potato and
meat can be switched at a constant rate)- PPF is a straight line
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Figure 1
The Production Possibilities Frontier (a)
Panel (a) shows the production opportunities available to the farmer and the rancher.
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• Assume only two people
– Rancher – Farmer – Both want to consume both meat and potato
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Figure 2
How Trade Expands the Set of Consumption Opportunities (a, b)
(a) The farmer’s production and consumption Meat (oz)
Farmer's production and consumption without trade
1
Interdependence
• Consider our daily life
– Eat food, wear cloths, move around, etc. – We depend on many other people, which become possible due to trade across people (countries)
3
A Parable for the Modern Economy
• Situation 1
– Rancher produces only meat & farmer produces only potatoes
• Consume only what they produce
– Both could gain from trade
• Situation 2
– Rancher and farmer produce both meat and potatoes, consuming what they produce – Both could gain from specialization and trade (why?)
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Interdependence and the Gains from Trade
PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University
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32 Potatoes (oz)
0
24
48 Potatoes (oz)
Panel (b) shows the combinations of meat and potatoes that the farmer can produce. Panel (c) shows the combinations of meat and potatoes that the rancher can produce. Both production possibilities frontiers are derived assuming that the farmer and rancher each work 8 hours per day. If there is no trade, each person’s production possibilities frontier is also his or her consumption possibilities frontier.
(c) The rancher’s production possibilities frontier Meat (oz) 24
If there is no trade, the rancher chooses this production and consumption.
8 12 4 A
B
0
16
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• People provide you with goods and services
they produce, because they get something in return
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4
A Parable for the Modern Economy
• Want to show “both could gain by trade,” even in the situation 2 • Production possibilities frontier
– “Mixes of outputs that can be produced efficiently” – Assume the available resource (time) and production capability (productivity) are given
7
A Parable for the Modern Economy
• Specialization and trade
– Initial condition A & B in previous slide – Farmer – specialize in growing potatoes
• Devote all time growing potatoes
– Rancher – specialize in raising cattle
• Reduce time for growing potato into half, using
the time to produce meat (next slide)
– Trade: 5 oz of meat for 15 oz of potatoes – Both gain from specialization and trade