Absolutely incredible 👌 my opportunity cost for skipping the lectures in my collage is extremely lower than my opportunity cost for watching this video . I'd always trade you-tube for collage 😆
@@fuzzymeep @fuzzymeep Like flat earthers and anti-vaxers? What else are you supposed to do except belittle them? I think for those groups we can make an exception for bad manners.
Great video. The economist Steven Landsburg has a book where he shows that even if 'Harry' can make BOTH products faster than Lloyd, there can still be advantages to them cooperating (he uses an example of a carpenter and electrician). It's not always obvious, but using the opportunity costs of each, we can find the optimal ratio of both products produced by each.
A philosophical question: Where does one economy being and another end? Individuals? Companies? Nations? Regions? Farms? There is also an overlapping web of codependant interacting economies. For example: If I live in an area of country A that has an opportunity cost for growing coffee that is five tons of sugar, I can compete with the sugar imports from country B, even if my country on average can't. Which is why most countries have at least some production of food, not only the lofty goal of "not depending on the international market". Then we have subsidies and other external economic factors, that ruin the model.
Hi, MBA here. So, to answer your questions: 1) broadly speaking, there is a division between microeconomics and macroeconomics. Smaller entities, like individuals, families, local businesses, and even national companies can be studied better with microeconomics. Studying the output of nations, the global economy, transnational companies, etc is more the purview of macroeconomics. However, these two fields don't have absolute values. The coffee example at the end is a great example. The macroeconomic reality of drought in one country led to the microeconomic phenomenon of increased prices at your local coffee shop. 2) interdependence is a way to model the interactions at all levels as well between them. So, yes, you're right! Comparative advantage can exist inside of countries, counties, or sometimes even neighborhoods! In 100% pure rational market, you would not need or have taxes, tariffs, or other external barriers or protections in the market. Instead, every person, company, state, and nation would produce only those goods and provide only those services for which they have the greatest comparative advantage and they would trade for everything else. Markets do have regulations and protections built in to subsidize or artificially manipulate them in the modern world. These exist for myriad reasons, most of which are political and not economically sound. With food production, you have what is called primary industry or the primary sector. Every nation that can produce food, produces it. Mostly because unlike clocks or tables, you cannot survive without food. Nations therefore do not always wish (for political, not economic) to trade for 100% of their food, even if this would allow their economy to operate more efficiently. Also, most countries (save for the smallest regions like Monaco, Singapore, or Liechtenstein) have a comparative advantage in at least SOME type of food. The video didn't touch on this, but another important aspect of trade is shipping. So, while China may produce rice much more effectively than the USA, if it costs more to ship that rice from China to New York than it does for rice from Arkansas (America's largest rice producing state) to be shipped the same distance, then even though China has a comparative advantage in production, Arkansas' geography gives it a comparative advantage in distribution. Deciding where to order your restaurant's rice from (in a strictly rational economic situation) must consider ALL opportunity costs, not merely those associated with production.
the theory is a theory - it is oversimplified and omits certain factors for the sake of making sense at a base level. Your questions are valid but the point of a model is to illustrate one theory that is part of a more complex whole.
As long as the country protects trade so that its citizens aren't outcompeted, and provide opportunities for its citizens to gain new skills. If they can't compete, the country should tax incoming products and use protectionism. As this evens the playing field between large foreign conglomerates and companies compared to local ones.
Not necessarily buddy, protectionism involves a lot of other variables that goes beyond simple trade, It has employement, gross income, investement and inflation, there foreign exchange stock as well, encourage a completely open economy can cause the lack foreign exchange, depreciating the exchange rate and increasing the cost of production in the process. The model you just seen is a very basic static model and doesn't take into account the change of various variables or even other variables such as time, that doesn't mean that protectionism is universally good though, many of these issues I just mentioned can be exacerbated by protectionism like say if we simply decided to tax the importation of stell on a crisis, that would be very problematic and It's repercutions doesn't fit on a comment. Edit: No disrespect but you overestimated the effect of the Smoot-Hawley Tariff Act, even more considering that It came DURING the depression (the very start of It), and the Great Depression of the 30's, according to many MANY scholars came with the overrall conclusion that It was caused by external factors like the recovery of Europe post the First War, you got to remenber that the continent had to import almost all products and productive capital since they lost almost all of the productive capacity, when they recovered they didn't need so many products from the US, that means that the exports suffered a great hit, which, according to Keynes (in my opinion the best author to understand the crisis), generated a cyclical effect of unemployment (factories didn't need employees so they fired them, ex-employees lost income and need It to cut expenses, hence and repeat basicly), which is what some people on economics call "paradox of poverty" or "paradox of excess", basicly the excess of unemplyment leads to a cycle of cuts on consumption that leads to cuts on employment and cease investments (because, as I believe you know, investments leads to higher costs because of depreciation).
Hey Professor, I checked out your Economics playlist and there are some videos private... are they supposed to be published or did you forget to remove them?
besides the example you gave is about Brazil and the Dominican Republic and after you spoke about Brazil and Guatemala which was a bit confusing, it was a great explanation :)
Wish you would've used a more complex example to explain comparative advantage in the context of countries, the examples you gave made it sound like you just need to find the absolute advantage for each country and go for that one, but the exercises given by my professor are way harder
MBA here. So, there are two major types of competitive strategies: cost strategy and differentiation strategy. Producers must choose to focus on one or the other and that choice is often a marketing decision. Generally speaking though, if you wish to compete on cost, you want to produce the highest quality product possible within a given set of cost drivers. If you want to compete on differentiation, then you focus on the unique features of your product, regardless of the price asked for. With tables this is a little tricky since there isn't too much you can do differently in order to construct a basic table. A better product to use would be cars. Some manufacturers, like Hyundai, Kia, Ford, and Toyota tend to compete on cost: they produce the best product possible within a constrained supply chain and with materials of a certain quality. The lower they can keep their costs, the lower they can keep their prices, which in turns drives sales for them. The quality of the product is less important than the price point where it can be offered. That is not to say that quality isn't important: it is! It's just not the thing you're competing on--cost is! A differentiation strategy focuses on selling the unique features (including extremely high quality) that your product possesses. Ferrari, Lamborghini, and Porsche all compete using a differentiation strategy. For ubiquitous products like tables or birdhouses, there is little emphasis on differentiation strategy unless we're at the higher end of the market. This leads most manufacturers to work on cost containment instead of differentiating themselves. After all, a $25 table and a $30 table are most likely of about the same quality and sufficient to satisfy the consumer's demand. Imagining ways to distinguish your product enough to justify the increased price is going to be tough. Now imagine the difference between a Ford and a Lamborghini. They aren't really competitors: they are serving two very different niches!
@@whyareyoulookinghere9135 LOL. You must have been hiding under an alternate-fact rock. The mainstream media’s and governmental FUD have been so bad to the point where the anchors at CNBC are calling out its own editors who need to appease like likes of oil companies and legacy autos. Sam Alexander the UA-camr has done a decent expose on the mainstream-media’s FUD champaign against Tesla. You believe what you believe, and I’ll believe what I believe to take TSLA to the retirement bank. I got in early will HODL till 2030. Let’s check back in 2025 to see how we are both doing. Let’s just say that I won’t be working and I’m still young. ;)
Doesn't the value of the products come into it i.e. if a ton of coffee is worth 5x a ton of sugar then it makes more sense to produce 1 ton of coffee than 3 tons of sugar?
Except country B can live without coffee but country B needs sugar as its a necessity. I get the logic but something is missing. I suppose it's just an intro to the idea. Also the quality (and perception of quality) of the good matters, sure you can make 3 birdhouses but are they the same quality? and do they have similar branding? ...do you think the theory comes first or do you think the theory is made after people do something...
I think starting from the ground up and having a good foundation is helpful in building a body of knowledge. It's like how air resistance and friction is initially negligible when you start off learning physics. You can just stack them on top later after you've built up your body of knowledge. If you need to immediately use the knowledge for something practical, then I guess you can skip the basics and go straight for the applicable stuff. But I think you can go much higher if you have the basics down. Because of the better foundation.
The analysis on economics, by neoclassical standards (AKA what this series are presenting), focus on quantitative results, they don't really try to come with any conclusion about more subjective things like quality for example. That is actually a really bad limitation of this particular school since this assumes that perfect competition will be optimal because of the higher production, It doesn't take into account quality and tecnology development, these on the other hand are masterfully brought up by Schumpeter (I may be a "bit" partial on this but seriously, take a read on some of his work, really good stuff, and he actually bothers to make observations BEFORE came up with his theory, yes I judging neoclassical school, they didn't made that, hell many of their assumptions aren't even falsifiable like utilitarianism, which is their whole basis and to think that they were trying to come closer to psychics and other natural sciences, ha).
Wait if it cost less tables per bird house for Harry, then it makes more sense for Harry to build tables right? Logically if it cost less then you make that for a comparable advantage.
Being new to the channel, I gave the video a thumbs up despite its glaring omission of practical examples (thus making the who thing almost meaningless). A follow-up with how this does and doesn't work in the real world could be extremely educational. (hint, hint). Unfortunately, such mathematical modeling falls apart when it encounters real world variables. The prisoners dilemma is an excellent example.
Could you look at the hollow earth conspiracy? It is one of my favourite. More than a Decade ago when i was a child i believed it for a few months even. I wish there were sci fi novels about it
Absolutely incredible 👌 my opportunity cost for skipping the lectures in my collage is extremely lower than my opportunity cost for watching this video . I'd always trade you-tube for collage 😆
This is my only schooling I voluntarily attend ever since I left college. Thank you for bringing us knowledge.
You mean dropped out?
@@fuzzymeep @fuzzymeep Like flat earthers and anti-vaxers? What else are you supposed to do except belittle them? I think for those groups we can make an exception for bad manners.
@@WiggleJimmy and a general lack of common knowledge
im srry to hear that
@@WiggleJimmytrans as well
I hope you are incredibly rich off of these videos, they are so informative, never stop
Totally obessed with the intro...😂
We are all grateful we didn’t change it too much.
Yes, I find myself walking around humming it!
@@martinblank4250 sameeeee
Same here😂😂
Me too😂
I think Professor Dave has both absolute and comparative advantage over any other educational UA-cam channel. Nicely done.
Great video. The economist Steven Landsburg has a book where he shows that even if 'Harry' can make BOTH products faster than Lloyd, there can still be advantages to them cooperating (he uses an example of a carpenter and electrician). It's not always obvious, but using the opportunity costs of each, we can find the optimal ratio of both products produced by each.
David Riccardo did it first.
I'm a student from India, pursuing Chartered Accountancy, and this video was a boon for me. Thanks a lot. Keep up the good work❤❤
what a perfectly explained concept!
Professor Dave, you really make think, and I love thinking. 🤔🙏
I love how they are named Harry and Lloyd
Lum and Lumber.
You're so good at explaining what you're talking about. You're great.
Thank you, professor! This helps me enlightened about those absolute and comparative advantages.
My 1st language is not even English, but he explains in such a simple way that I understand it . Thankyou
Many questions I’ve had have been answered, as always. Thanks Professor Dave.
All my high school life, I thought he was a science teacher. Now I'm in university studying a commerce subject and he's still my teacher.
I’m just becoming aware of this channel. Professor Dave, I think you might be a genius communicator bro. Subscribed.
Thanks Professor Dave!
Great explaining, loved your voice and awesome visuals and editing. Thank you for this wonderful vid:)
Have a great day Professor! 🤘
u too bro
This is great. I able to stop and rewind easily illustrated
*Thanks Prof Dave, have a nice day to everyone , and healthy.*
This video was so helpful! Thank you Professor Dave! 😊🙏
Great explanation, love from Indonesia prof.Dave
Love the intro…appreciates the presentation…clear & easy to understand !!! Thanks !!!
Wow, this was a blast from the past from my highschool economics class.
Thanks for explaining this concept.
Thank you for the education Dave 👍
mate you havent watched the whole vid yet
Simple and easy to understand
You are ABSOLUTELY amazing!
Thanks for explaining it simply
Welldone, Dave, great video
Brilliant explanation
Thank you
thank you for lesson
Thank you Dave. I hope you are doing well.
Thank you so much. It is really easy to understand, honestly
It was 💯% useful. Thank you for creating such efficient video with best visuals 😻😻👏🏻👏🏻👏🏻
Quite understandable and easy explained.
Excellent episode
Great. Thank you am studying IB and you make it easy on me to understand it in your simple way .
Very helpful
So good at explaining, keep it up and thank you.
A philosophical question:
Where does one economy being and another end?
Individuals?
Companies?
Nations?
Regions?
Farms?
There is also an overlapping web of codependant interacting economies.
For example:
If I live in an area of country A that has an opportunity cost for growing coffee that is five tons of sugar, I can compete with the sugar imports from country B, even if my country on average can't.
Which is why most countries have at least some production of food, not only the lofty goal of "not depending on the international market".
Then we have subsidies and other external economic factors, that ruin the model.
Hi, MBA here.
So, to answer your questions:
1) broadly speaking, there is a division between microeconomics and macroeconomics. Smaller entities, like individuals, families, local businesses, and even national companies can be studied better with microeconomics. Studying the output of nations, the global economy, transnational companies, etc is more the purview of macroeconomics. However, these two fields don't have absolute values. The coffee example at the end is a great example. The macroeconomic reality of drought in one country led to the microeconomic phenomenon of increased prices at your local coffee shop.
2) interdependence is a way to model the interactions at all levels as well between them. So, yes, you're right! Comparative advantage can exist inside of countries, counties, or sometimes even neighborhoods!
In 100% pure rational market, you would not need or have taxes, tariffs, or other external barriers or protections in the market. Instead, every person, company, state, and nation would produce only those goods and provide only those services for which they have the greatest comparative advantage and they would trade for everything else. Markets do have regulations and protections built in to subsidize or artificially manipulate them in the modern world. These exist for myriad reasons, most of which are political and not economically sound.
With food production, you have what is called primary industry or the primary sector. Every nation that can produce food, produces it. Mostly because unlike clocks or tables, you cannot survive without food. Nations therefore do not always wish (for political, not economic) to trade for 100% of their food, even if this would allow their economy to operate more efficiently.
Also, most countries (save for the smallest regions like Monaco, Singapore, or Liechtenstein) have a comparative advantage in at least SOME type of food.
The video didn't touch on this, but another important aspect of trade is shipping. So, while China may produce rice much more effectively than the USA, if it costs more to ship that rice from China to New York than it does for rice from Arkansas (America's largest rice producing state) to be shipped the same distance, then even though China has a comparative advantage in production, Arkansas' geography gives it a comparative advantage in distribution. Deciding where to order your restaurant's rice from (in a strictly rational economic situation) must consider ALL opportunity costs, not merely those associated with production.
the theory is a theory - it is oversimplified and omits certain factors for the sake of making sense at a base level. Your questions are valid but the point of a model is to illustrate one theory that is part of a more complex whole.
Thanks Dave
This was very helpful thank you!!!!
Amazing amazing explanation sir lovely I clear my concept .
Great explanation
This is why trade it good.
And protectionism is usually bad.
As long as the country protects trade so that its citizens aren't outcompeted, and provide opportunities for its citizens to gain new skills. If they can't compete, the country should tax incoming products and use protectionism. As this evens the playing field between large foreign conglomerates and companies compared to local ones.
@@MasterGhostf how did the Smoot Hawley Tariff Act go? Anyone? Anyone?
A depression? Oh great
@@dongiovanni4331 That's not quite right. The Smoot-Hawley Tariff Act worsened the effects of the Great Depression, it didn't cause it.
Not necessarily buddy, protectionism involves a lot of other variables that goes beyond simple trade, It has employement, gross income, investement and inflation, there foreign exchange stock as well, encourage a completely open economy can cause the lack foreign exchange, depreciating the exchange rate and increasing the cost of production in the process. The model you just seen is a very basic static model and doesn't take into account the change of various variables or even other variables such as time, that doesn't mean that protectionism is universally good though, many of these issues I just mentioned can be exacerbated by protectionism like say if we simply decided to tax the importation of stell on a crisis, that would be very problematic and It's repercutions doesn't fit on a comment.
Edit: No disrespect but you overestimated the effect of the Smoot-Hawley Tariff Act, even more considering that It came DURING the depression (the very start of It), and the Great Depression of the 30's, according to many MANY scholars came with the overrall conclusion that It was caused by external factors like the recovery of Europe post the First War, you got to remenber that the continent had to import almost all products and productive capital since they lost almost all of the productive capacity, when they recovered they didn't need so many products from the US, that means that the exports suffered a great hit, which, according to Keynes (in my opinion the best author to understand the crisis), generated a cyclical effect of unemployment (factories didn't need employees so they fired them, ex-employees lost income and need It to cut expenses, hence and repeat basicly), which is what some people on economics call "paradox of poverty" or "paradox of excess", basicly the excess of unemplyment leads to a cycle of cuts on consumption that leads to cuts on employment and cease investments (because, as I believe you know, investments leads to higher costs because of depreciation).
Get this man in my school 😤😤
So amazing and inspiring video.. Thanx Prof. Dave
Hey Professor, I checked out your Economics playlist and there are some videos private... are they supposed to be published or did you forget to remove them?
The private videos are the ones that will be released in the future
They'll all get released! And many more on the way.
thank you so much omg
Thanks a lot! I have an upcoming exam about this and was really confused T_T you made it so much easier to understand
tysm!
OMG YOURE AMAZING THANK YOU SO MUCH MAY GOD BLESS YOU ALWAYS
good explanation,, thank you
GREAT VIDEO!
you're the best
Professor Dave is a highly intelligent man.
thanks
Khan was my goto, but this time, you won!
ty
Thanks🎉❤
besides the example you gave is about Brazil and the Dominican Republic and after you spoke about Brazil and Guatemala which was a bit confusing, it was a great explanation :)
Thank you❤️🙏🏾
Gains from trade, comparative advantage, and opportunity cost
THANK YOU
Good explanation
nice and simple. good one.
Thenkkyou!
great video !!
Masterwork in the intro 🔥
Great explanation as well
u saved my life
Wish you would've used a more complex example to explain comparative advantage in the context of countries, the examples you gave made it sound like you just need to find the absolute advantage for each country and go for that one, but the exercises given by my professor are way harder
cool stuff
Great video! Liked and subbed
How does the quality of the product enter into this?
MBA here.
So, there are two major types of competitive strategies: cost strategy and differentiation strategy.
Producers must choose to focus on one or the other and that choice is often a marketing decision.
Generally speaking though, if you wish to compete on cost, you want to produce the highest quality product possible within a given set of cost drivers.
If you want to compete on differentiation, then you focus on the unique features of your product, regardless of the price asked for.
With tables this is a little tricky since there isn't too much you can do differently in order to construct a basic table.
A better product to use would be cars. Some manufacturers, like Hyundai, Kia, Ford, and Toyota tend to compete on cost: they produce the best product possible within a constrained supply chain and with materials of a certain quality. The lower they can keep their costs, the lower they can keep their prices, which in turns drives sales for them. The quality of the product is less important than the price point where it can be offered. That is not to say that quality isn't important: it is! It's just not the thing you're competing on--cost is!
A differentiation strategy focuses on selling the unique features (including extremely high quality) that your product possesses. Ferrari, Lamborghini, and Porsche all compete using a differentiation strategy.
For ubiquitous products like tables or birdhouses, there is little emphasis on differentiation strategy unless we're at the higher end of the market.
This leads most manufacturers to work on cost containment instead of differentiating themselves. After all, a $25 table and a $30 table are most likely of about the same quality and sufficient to satisfy the consumer's demand. Imagining ways to distinguish your product enough to justify the increased price is going to be tough.
Now imagine the difference between a Ford and a Lamborghini. They aren't really competitors: they are serving two very different niches!
Tesla vs legacy autos: Does Tesla have an absolute advantage or comparative advantage with AI-enabled FSD program and battery/motor tech?
neither, tesla doesnt have better self driving tech, infact they have worse
@@whyareyoulookinghere9135 Is your opinion based on factual underpinning or on what you have read in the news?
@@korswe factual underpinning, the news are the people who make tesla look wonderful
@@whyareyoulookinghere9135 LOL. You must have been hiding under an alternate-fact rock. The mainstream media’s and governmental FUD have been so bad to the point where the anchors at CNBC are calling out its own editors who need to appease like likes of oil companies and legacy autos. Sam Alexander the UA-camr has done a decent expose on the mainstream-media’s FUD champaign against Tesla. You believe what you believe, and I’ll believe what I believe to take TSLA to the retirement bank. I got in early will HODL till 2030. Let’s check back in 2025 to see how we are both doing. Let’s just say that I won’t be working and I’m still young. ;)
thank you sirrrrrr:)
This was fun :)
first video after which i clearly understood what this theory means
wow thats great
This guy saves my college GPA!
An I the only one that prefers his educational content to his debunking content?
thanksss a lott
PLEASE UPLOAD DOPPLERS EFFECT OF SOUND (ALL CASES)
Doesn't the value of the products come into it i.e. if a ton of coffee is worth 5x a ton of sugar then it makes more sense to produce 1 ton of coffee than 3 tons of sugar?
If Dave was my science teacher, I would have so much fun in high school
dont bullshit
these videos are great. I don't understand how they are so immensely overshadowed by your flat earth content
Easy as cake❤
Nice succinct economics chat.
Except country B can live without coffee but country B needs sugar as its a necessity. I get the logic but something is missing. I suppose it's just an intro to the idea. Also the quality (and perception of quality) of the good matters, sure you can make 3 birdhouses but are they the same quality? and do they have similar branding? ...do you think the theory comes first or do you think the theory is made after people do something...
I think starting from the ground up and having a good foundation is helpful in building a body of knowledge.
It's like how air resistance and friction is initially negligible when you start off learning physics. You can just stack them on top later after you've built up your body of knowledge.
If you need to immediately use the knowledge for something practical, then I guess you can skip the basics and go straight for the applicable stuff. But I think you can go much higher if you have the basics down. Because of the better foundation.
@@WanderTheNomad I agree. Don't really know why i commented haha thanks for taking the time to write a response.
The analysis on economics, by neoclassical standards (AKA what this series are presenting), focus on quantitative results, they don't really try to come with any conclusion about more subjective things like quality for example. That is actually a really bad limitation of this particular school since this assumes that perfect competition will be optimal because of the higher production, It doesn't take into account quality and tecnology development, these on the other hand are masterfully brought up by Schumpeter (I may be a "bit" partial on this but seriously, take a read on some of his work, really good stuff, and he actually bothers to make observations BEFORE came up with his theory, yes I judging neoclassical school, they didn't made that, hell many of their assumptions aren't even falsifiable like utilitarianism, which is their whole basis and to think that they were trying to come closer to psychics and other natural sciences, ha).
i almost couldn't recognize my boy dave without the hair😂
interesting. 🤔👍
I dont get it
Wait if it cost less tables per bird house for Harry, then it makes more sense for Harry to build tables right? Logically if it cost less then you make that for a comparable advantage.
Being new to the channel, I gave the video a thumbs up despite its glaring omission of practical examples (thus making the who thing almost meaningless). A follow-up with how this does and doesn't work in the real world could be extremely educational. (hint, hint).
Unfortunately, such mathematical modeling falls apart when it encounters real world variables. The prisoners dilemma is an excellent example.
All hail the Game Theory, gotta love It when we see the problems with neoclassical school of economics.
what's so special about light which when reflected from mirror show us our image?
not going to lie, I don't know how I got here. kind vibing tho
Could you look at the hollow earth conspiracy? It is one of my favourite. More than a Decade ago when i was a child i believed it for a few months even. I wish there were sci fi novels about it
0:20 Rick astley lol