Comparative advantage (basic microeconomics)

[magus341]

Imagine you had to produce all the goods you wanted to use yourself with no help or raw materials from others. Everyday would be a fight for survival as you tried to find enough food to eat. Your clothing, if any, would be simple animal skins. Any tools would be made of stone and sticks. Your standard of living would be horrible, even in

Comments

[psyllogism]

You really think this is the hardest idea in micro?

[magus341]

Hmm. I'm just really good at explaining it. Most people don't get it. They assume you have to be absolutely better at things for train to be beneficial.

[anailia]

I think most people must not be very smart =) But you are also good at explaining.

Now, of course, we can get into the "opportunity cost" of the satisfaction a person might get out of producing a product from end to end (or at least closer to it) vs his satisfaction of pressing a button to stamp the orange on a pencil tube....

[magus341]

Satisfaction from making something plays a huge role in explaining human action. Artwork, cooking, music and even writing essays such as this one are best explained not by the financial gain but by the utility one gains from the making. Usually people don't consider pencils to be a good thing to make for the experience itself, but they might.