00:01
So here we're talking trade and we need to distinguish between the absolute advantage and the comparative.
00:07
The comparative is actually easier to say.
00:11
The person with comparative advantage has the lowest opportunity cost.
00:16
Whereas the person with the absolute advantage has the lowest dollar or time cost.
00:24
Right? so we are thinking about a direct measure of cost versus an indirect measure of cost.
00:30
Right? so first of all we have two people.
00:34
Right? we don't need both of this.
00:36
I'm just gonna look at the first side.
00:38
We have the farmer, we have the rancher, we have meat, and we have potatoes.
00:44
And this is hours per kilogram.
00:49
And we have 9, 3, 3, 4.
00:54
So if we look at meat, here is the absolute advantage.
00:59
Right? less time per kilogram.
01:05
And similarly here is also the absolute advantage.
01:10
Right? the farmer just produces potatoes more quickly with less time.
01:15
Now for comparative advantage we have to think about the opportunity cost.
01:22
And the way that is maybe easiest to do that is to think about the ratio...