00:01
Steve and craig have been shipwrecked on a deserted island in the south pacific.
00:06
Their economic activity consists of either gathering pineapples or fishing.
00:10
We know steve can catch four fish in one hour or harvest two baskets of pineapples.
00:15
In the same time, craig can reel in two fish or harvest two baskets of pineapples.
00:19
Does steve or craig have an absolute advantage in producing fish? so the absolute advantage is going to be the one that can produce more output with the same resource at the other.
00:31
Both of them will use one hour to produce the fish.
00:35
Steve can produce four versus craig that can produce two.
00:42
Which one has a competitive advantage in producing pineapples? comparative advantage takes to account the opportunity cost.
00:53
So in this case, steve can produce four fish at the cost of two baskets of pineapples.
01:00
Craig can produce two fish at the cost of two baskets of pineapples.
01:04
So we're asking for the comparative advantage in producing pineapples.
01:08
Craig has to give up less fish to produce the pineapple.
01:15
So steve gives up four fish to produce two baskets of pineapples...