Wednesday, January 26, 2011

Timely editorial on Comparative Advantage, which we just covered in class...

In class yesterday and today we covered the topics of Absolute and Comparative Advantage.  Below is an excerpt from an editorial in today's Wall Street Journal.  It is probably one of the most difficult economic concepts to really understand intuitively. Click HERE to get a better explanation than I could possibly give. Click HERE for my instructional video on doing the math for Absolute and Comparative Advantage.  Ignore my annoying mannerisms and focus on what I say and demonstrate.  It is tested on BOTH the AP Microeconomics and Macroeconomics test.

WSJ: Comparative Advantage and American Jobs: U.S. workers win when industries are free to invest where they are the most productive
""The key insight of the principle of comparative advantage, which drives much of globalization and its economic benefits, is that hard-working Americans are not going to excel at everything. That's okay, just as it's okay that Phil Mickelson is better off on the golf course and not painting his own house.

Comparative advantage allows each country to concentrate its energies on the particular goods and services that it is relatively productive at compared to the rest of the world. The countries then export those abroad, and in exchange import other goods and services produced relatively more efficiently abroad.""
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