Reference no: EM132349955
Assignment: Chapter 2: Chapter 2 shows and discusses the gains from trade that can result when individuals, firms, or countries specialize in producing goods for which they have the comparative advantage, and trade those goods with others.
Gains from specialization and exchange can be seen in many situations. For example, most people that we pay to do things for us (e.g. grow our food, cut our hair, tutor us, etc.) perform the task for a lower opportunity cost than we would bear if we were to do it ourselves. This is where the gain from trade that benefits both parties comes from, and is why it is rational for you to pay for the service.
To show that you understand how comparative advantage works in the modern economy, please discuss a good you recently purchased and address the following prompts:
1. What is the item, and how much did you pay for it?
2. What is a reasonable estimate of how long it would take you to make the item if you hadn't been able to buy it? You need to come up with a number of hours or days or years, or whatever time measurement you want, for how long it would take you. Don't try to avoid this. If you can't figure it out, pick another good.
3. Who worked to get the money to pay for the item, and how long did they have to work to get the money? If your money came from the government, see the how the government gets money page.
4. Based on your answers to 2 and 3 above, was it rational to buy the good? Explain. Make sure you compare the time it would take you to make the good (mentioned in part 2) and the amount of time that had to be worked to get the money (mentioned in part 3). It is only rational to buy something if you give up less resources working to earn money to pay, than you would have if you made the good yourself. If it turned out to be irrational, why did you buy it?
If you want to see an example, check out the "great work" linked above. But do not copy the example or even the wording. There are many ways to express these ideas if you understand the material. Please find your own words or face the consequences of academic dishonesty.