I stared at my book for hours and listened to lecture for a whole period. Meanwhile I could just watch this vid and understand it within 5 min. It was that simple. Thank you
this is a great video for grasping the crux and basis of these theories! try putting 'simplified' or something of the sort in the title so more people can find it. loved it.
Second explanation seems weird, Germany have comparative advantage for both cars and sausages, say: Germany produce both: total cost : 2000 + 1000 = 3000 Hours, better than USA produce only cars and Germany produce sausage, which cost 3500 hours.
Why Germany was producing sausage was the essence of the explanation of comparative advantage which means when a country has absolute advantage of the other in the production of the goods in question. I hope that helps
lets be honest we all know germany should have a advantage in producing cars. And instead of sausages you could give USA riots or police brutallity. The absolut advantage would be enormous.
this is just supply side and does not take into demand. so the model is a not applicable in the real world. also the examples you have shown are very confusing. you moved from Adam smiths absolute advantage to comparative advantage and moving the figures, it would be better to make a single example. plus this model doesn't tell you anything in reality. the standard trade model is the model applicable only.
Momin Nz You must have skipped the parts in your economics courses that require you to respect the use of models, ceteris paribus, and the assumption of rational human behavior for economic studies. Economic application requires our respective economic qualities and experiences to realize that these economic tools being taught are just starting points for us to use them on this very complicated human behavior discipline.
Im sure I have not missed any part. The point I'm trying to explain is that these models are not applicable in real life. means they are pretty much useless. from a learning stand point they are fine. In reality the models are very complex its just like e.g you cannot follow 1 economic theory such as mercantilism or capitalism. Thanks.
