Econ 151 Sec 4 Winter 2021 Zoom Class 1/13/21

all right okay uh well again welcome to class it's been a week and it's been kind of a crazy week because uh last week when we were in class that's when um all the commotion in washington dc was going on and afterwards i know when i saw the news i was like what the heck is going on here so um seems like there has been even more um uncertainty and and so anyway uh jordan uh i read something that i find pretty funny about is that all the people that uh went and virtually attacked the capitol building can be up can are can be arrested and receive prison time of up to 10 years according to trump's like his own one of the laws he signed about destroying federal property during the black lives matter movement when that's right i read that too so well this is not a you know class about politics so i will just stick to economics now did everybody uh watch the video uh posted before this class okay good all right uh oh you know what before we get into that let me introduce you your best friend uh for the semester uh your ta brigham uh brigham i have joined i mean has joined us for a class and he'll continue to to join us most most days right right so brigham go ahead and introduce yourself really quick and then also just uh announce again your office hours in case uh some students didn't get it yeah so my name is brigham emmett um i am actually an econ minor but i really love economics um i'm a senior my office hours are going to be on mondays from 11 30 to 12 30 and then on thursdays from 5 to 6. um most of you guys should have gotten the email let me know if you didn't if you guys need another time outside of those hours to meet just shoot me an email and let me know and i'll be happy to figure something out with you okay thank you brigham yeah so i've had brigham for a couple of different classes i think he's a really good student and he can be an additional resource i asked him to pick office hours outside of mine so that if mine somehow don't work for you hopefully his office hours will work for you and uh i also received uh the information on the online econ tutoring lab uh and the hours a little bit different than what i posted in the syllabus from before so i will adjust that but you have that open pretty much every day from morning to fairly late in the afternoon so that's another resource you can utilize to have your questions answered okay all right uh any questions about uh brigham and and uh or for brigham not about brigham um okay if not then i forgot there's one more administrative thing that i need to take care of which is starting today i will be taking attendance because we do have that attendance policy and uh i can't remember if i told you at the end of last class or not we will use a tool called top hat and uh there are a few ways of doing this but you need to first have a top hat account and then join our class and our class drawing code so if you go to the google app store if you want to just uh or apple app store if you want to just do the app on your phone just search for top hat it's one word download it if you are on a computer go to tophat.com and create an account the only thing you need to do to make sure you do is to use your byu idaho email okay because byu idaho has a contract with top hat if you use your byu i email you will not be charged it is free for you if you use your personal email top hat will charge you money okay so use your school email you don't have to check that email after you use it to set up this account i mean you want to check that email because that's the only one i have to contact you but for this purpose please make sure you don't use your personal ones though because i don't want you to end up being charged money for it okay and our once you create an account uh you can join a class by putting a join code in and the join code for our class is six 33460 four okay so i'll put that in the chat three three four six zero four um okay so if you put that code in it should add you to this class called econ 151 section 7 winter 2021 okay if you're having trouble please let me know question sure is it the brigham young university idaho canvas one or the canvas yeah because we use canvas for our class yep and then okay once you um have joined our class then what's going to happen is every time we have class i will uh tell you in the very beginning a code to take your attendance now once you have created your account you can record your attendance by using the app or logging online or just sending a text message to a number with that code so now you have three different options and today uh once you have joined the class the attendance code is 1772. so so far i have 20 students that have joined the class so but i will put the attendance code in 1772 okay so i put the attendance code in the chat as well if you want to check that okay all right anybody having trouble registering for top hat do i need to get on and do that right now or can i do it after class uh you should probably want to do that right now because that code will be uh uh closed or the attendance opportunity will be closed so that's why i'm giving you a few minutes right now to do it where do we put in the code at i came in right as you were explaining it okay so um did you hear the part about joining a class uh no okay so if you go to top hat either download the app or go to tophat.com create an account using your school email okay otherwise you have to pay and then you use the 334604 code that i have in the chat i guess if you just join i don't know if you saw that so three three four six zero four join code okay to join the class and then the attendance code is one seven seven two okay that's for top hat either the app or tophat.com okay anybody else having trouble yeah pho sorry it's just taking me a while it signed me up my bookmarks not working um when is it gonna disappear like right after class or um if you need extra time today i will leave it open after class uh for you know half an hour or something okay yeah but in the future you know this will only be for the beginning of the class yeah today i guess it's a little bit different all right anybody else having trouble i only got 28 people um my uh byu email isn't working so i'm struggling with it yeah my email is not working either oh really your emails are not working okay yeah are you guys using the the email that has like a little bit of letters and numbers or just your username and your at byui yeah because your your byu i email should be um the one with uh numbers like it should be the first three letters of your last name and then a bunch of numbers that's the one if you use your username that's not that's not going to work very well thanks franco all right well so um let's just yeah i'm gonna leave this open uh until after class for you know half an hour an hour and you guys can maybe keep trying after that so i thought this was going to be quick but i can't just keep waiting so i got 30 people in so that means there are uh eight of you that are having trouble so i will leave this open and at the end of the class i'll ask you how many of you are still not registered and then um then we'll figure out a time for you to finish okay all right so uh now going to the uh the content of this unit so you've been studying in unit one you should have read chapters one through three i know that there was a hiccup with concept check quiz i apologize for that because at the beginning only one of you emailed me in my regular email account and the rest of you just all messaged me in a canvas but even though i told my email many times you know i trust canvas source but it still doesn't show up in my email app it goes to this cluster folder so i didn't see the the other emails i only saw that one email until i logged on a couple hours later in canvas and saw that a lot of people were having trouble so um but i hope with the extension of time everything worked out i didn't hear anything from anybody else with problems so i i hope that means you got it figured out okay um now you were also supposed to watch the video before today so in the video i went over the questions uh on the discussion sheet which was also in your module i hope you were able to follow along and i skipped question seven through ten because that is the hardest part of this unit and i'm going to talk about it with you today in class by going over that ex exercise at the end of your discussion sheet um now my before we get into that any questions concerns confusions about things you watched in the video did everything make sense or you have a comment about something were you able to watch it i guess i gotta make sure okay everybody watching it okay um i actually don't know how to get to the videos i'm so sorry i missed week one um okay you you added the class late right yes i did okay yeah it's uh no it's it's so if you go into your canvas uh course and click on modules and uh we're in unit one right now so we're doing one unit a week and uh um there's a link in there this is called unit one lecture video hey when do you want to watch the videos what when do you want us to watch each of the videos you're supposed to watch it by monday because remember on monday we don't meet in zoom and that's when you're supposed to be watching the videos okay and by today i expect you to have watch the video understood a lot of things and then come with questions okay yeah so um i can't remember exactly how many but uh uh at least a couple from each of my class emailed me on monday about you know uh why they couldn't log into class and stuff and asked questions that we talked about last week which actually made me happier about doing videos because that means when i had a live meeting last week then a few of you did not get the key information so having a video means you could go back and watch it again so when we have live explanations you don't miss things but anyway see okay um so no questions about what you're watching the video guys no comment either all right okay that's uh um a little unusual but all right then hey brother mom yeah go ahead i sorry i was trying to find um what it's called it's like the the question that i had it's is it the ppe the the line that shows like the potential yeah the pps can you explain a little bit about that i was just struggling to get the concept of it yeah that is actually exactly what we're going into right now okay so okay that explains it yeah so yeah uh because that is you know the the hardest part of this unit and uh so hopefully when you were watching the video you were able to to follow along with the discussion one file in module unit one and if you haven't please go to our campus course and uh go to unit 1 in modules and the last thing in unit 1 is this file this doc called discussion one okay and what we're going to do is to do the exercise in there right now okay so you can see that in the beginning there are 12 questions i asked you in discussion one and in the video i went over questions one through six and then um 11 and 12. so i left 7 8 9 10 for this class okay and with the exercise what i'm gonna do is i will introduce this exercise and then i'll put you into breakout rooms i want you to work on um work on this uh uh first question i'll give you just a few in a few minutes or just probably just couple minutes and then you can work on this first question then i will end the breakout rooms and bring you all back and then i ask you the questions uh i mean your how you answered it and we'll talk about if you answered it right or not but but feel free to talk like when i put you in breakout rooms that's giving you a smaller more secure environment so you can talk to each other and ask questions say hey how did you draw your line and maybe you know show hold your your drawing up to the camera or if you're doing it on computer share your screen and help each other figure this out okay don't just sit there in silence and try to work on this on your own so the exercise the setup says you know we have two countries the united states and brazil okay and they are uh producers of airplanes the only two producers of airplanes in the world and they each make two products large and small airplanes that's it okay and then i tell you you know they both have constant opportunity costs and then u.s can make 30 large airplanes a year if they only made 730 i mean large airplanes and if we only made uh small ones then we can make 40. and brazil can make 10 large airplanes if they only made large ones or they could make 30 if they only made small ones and then part a asks you to draw the ppfs for both the us and brazil okay so this shouldn't be a very complicated question okay so i'm gonna just uh randomly put you into uh rooms for now because i haven't divided you into groups yet but then go ahead and join that room and work together and talk about how you would draw that okay and i'll bring you back in a couple minutes [Music] okay well are you there you should join your room yeah there we go hey guys you guys uh got the short end of the straw where um you know the system assigned me to your room but [Laughter] i don't think that's a bad thing well you know i'm not really uh here to tell you the answer so really that you're having a discussion i i can answer any questions of course but you know you only have two people instead of three or four so sure um so we're just supposed to be discussing how we're drawing the line and then doing so yeah so actually draw ppf's for the us and brazil based on this setup of the scenario and see if you can draw them um the pps for these two countries and and if you if your answers are different then you know um talk about why you do it the way you did and figure out who's right right how do you suggest we draw them in a word document um well no you don't have to draw it on this word document that i put out you're not turning it in i guess i i should have been more called you're not turning this in this is for your exercise okay yeah so i can just do it on a piece of paper yeah do it on a piece of paper i better go out and tell everybody this uh via message okay yep okay so um now given this right by looking at how we came to the opportunity cost in u.s and brazil by setting the end quantities of your maximum quantities of each products equal to each other then dividing one side to reduce it to one and the other side then will be the opportunity cost for you so given that okay which country here has the comparative advantage in large airplane production the u.s okay how now how did you come to that conclusion like why because a large plane is well because with like small planes you're looking at less like they're worthless like small planes are worthless to the united states but they can make more of them in the united states versus the small small planes okay so um so you're comparing the quantities of small airplanes in the us versus brazil right okay jake you raise your hand yeah so the u.s has the comparative advantage with the large airplanes because they have to give up less small airplanes okay another word is the us uh has the lower opportunity cost here right in producing larger planes okay so you both of your conclusions are correct but the reasoning i want to make sure you you understand when it comes to comparative advantage okay you are comparing the same opportunity and the the opportunity cost for the same product in different producers and whoever has the lower opportunity cost of the product has the compared advantage so here when the us produces one large airplane we give up four thirds of small airplanes when brazil produces one large airplane they have to give up three large small airplanes so we give up less so we have a comparative advantage in large yeah is is that why um in a lot of cases countries like like for example the united states why we give resources and things to other countries because the labor cost is lower so they actually have more resources to produce so we're basically lowering our opportunity cost because they're producing it for a lower labor cost if we give them the materials is that is that correct so yes but not exactly accurate right so you gotta you gotta think not in the terms of labor cost alone but opportunity cost for labor okay so here we're not talking about whether the us is making a large airplane and how much it costs us in dollars and versus how much it costs in dollars for a brazilian large airplane we're saying that when we make a large airplane how many small airplanes are we giving up in opportunity right so if you're looking at opportunity costs then that's the compared advantage okay so that's like um compared to us making clothing in the united states it's cheaper for us to outsource that and then we give that up so that we can make higher technology yes yes okay so yeah we make things that are you know that cost us less an opportunity than other countries and then they make things that's relatively low in cost and opportunity cost for them not necessarily dollar cost okay i'll talk more about that um in a second i think may may help clarify things but my i do want to ask you an important question here though so we just determined the us has the comparative advantage in large airplanes because we have the lower opportunity cost then can i safely conclude without doing any more calculations that brazil must have the compared advantage in small airplane production okay i see foe nodding and i see john shaking so some nodding some shaking okay um well the answer is actually yes okay comparative advantage um is comparative because you compare opportunity costs so because the us has a lower opportunity costs in large airplane production then we must have the higher opportunity costs in a small airplane production because opportunity costs of two different products are really mathematical inverses of each other okay so let me show you with math how that works okay so we go back to ah okay got rid of a little bit too much but um we go back to our original equations okay and now to determine if you want to verify okay we need to figure out who has the opportunity compared advantage in small airplanes so that means we want to figure out how much 1s equals 2 in both countries to do that in the us we divide both sides by 40 and that gives you three quarters of a large which we already knew from our slope in brazil you divide both sides by 30 and that gives you one-third of a large so clearly brazil has the lower opportunity cost but if you notice okay when in the us one l is four over three small okay one small is three over four large in brazil one large is three small three small is three over one really right and then one small is one over three so these opportunity costs are really just flipping the the ratio for each product so when you have a lower cost in large airplane production and you flip the number to calculate your small airplane production then that cost must become bigger than the other producer right so that's why when you know the u.s has compared advantage in large airplane production you don't have to calculate the numbers to to know that brazil must have the compared advantage in small airplane production okay that makes sense so in fact i want you to write down that you know um comparative advantage is well i should say no no producer can have comparative advantage in both products because for the purpose of this class you only deal with two product cases so no producer will have compared advantage in both products and that means one will always have one and the only exception is if you have identical opportunity costs in everything then nobody has uh compared advantage you're exactly the same if your opportunity cost or is the same okay john what's your question okay i was just wondering if that you um to figure out the opportunity cost you divided it by itself and so on and so forth is that the same equation or same concept that you can do to find the opportunity cost on the on the graphs that have the curve instead of the the straight line no because uh yeah good question this only works with the straight lines okay because when you do the equation like this and divide it you're assuming that this opportunity class is true for every quantity you produce but with a curved ppf then that actually changes all the time and that's when you need to use uh calculus to figure out what your opportunity cost is okay because it's actually always changing but good question okay trevor so on the i think there's a concept quiz there was like the guy and the girl they were both producing something she had the comparative advantage and like the other advantage okay how did she have both advantages then okay let's let's talk about that so uh what is the other advantage called guys do you remember absolute advantage okay yeah how do you find absolute advantage how do you determine who has absolute advantage in something i'm guessing the one that has more material and more resources okay get back to the other person yeah jordan uh the one that's able to make the same thing with fewer resources okay yeah both have a both have a lower opportunity cost no actually uh well we're not considering opportunity costs because you cannot have a lower opportunity cost in both products that's what we just talked about right if you have lower opportunity cost in large airplanes your opportunity costs in small airplanes must be higher than the other producer okay so you'll never have lower opportunity costs in everything however okay like jordan pointed out compared advantage is determined by who can make this product with fewer resources or another way of looking at it is given the same resources who can make more of something okay so in this particular scenario i didn't tell you any specific resource other than time one year right so time is a key resource here so in one year given the same resource who can make more small airplanes between the us and brazil the u.s the us we can make 40 they can only make 30. right so we have the absolute advantage in small airplane production now who has the uh absolute advantage in large airplane production still the us still the us okay so when it comes to absolute advantage we can have both absolute advantage lie within the same producer okay because that is not any mathematical inverses involved in that person in that determination so one producer can have absolute advantage in everything but no producer can have comparative advantage in everything does that make sense okay now uh trade is based on comparative advantage okay so even though the us has absolute advantage in both large and small airplanes because we only have comparative advantage in large airplanes the trade theory tells us that we should still trade with brazil and we can get gain i'll show you in the next few minutes before our class is over how that works but you know this is something i like to explain a lot because in news media especially you hear people say well look at us you know britain brazil is so inferior in production of both small large airplanes why are we trading with them right we're only benefiting those brazilian workers and taking jobs away from us workers we should stop trading with them and make everything in the u.s because we're better at everything anyway well that is a false statement because that is trying to determine trade based on absolute advantage which is not how trade works okay i designed this question specifically to show you that this the us can be superior in both production and still we can gain from trade so let's move on and do this because of time so question c asks you to find the acceptable range for the terms of trade okay so terms of trade is really a relative price but we don't call it price for two reasons first of all we don't we haven't introduced the idea of dollars and etc yet and uh second of all here we're just assuming we're exchanging things for things so no money involved so we call it terms of trade so what this is saying is well if these two countries actually decide to come together and trade what is this range of prices if you will that both countries will accept right uh so because we can't just say well the us has the comparative advantage in large airplanes by the way according to your book if we have the compared advantage in large airplanes what should we do with our production anybody remember nathan do you remember robinson no okay anybody want to help him out if we have a comparative advantage then we should maximize that manufa manufacturing of that product okay yeah very good so that is called specialization right so trade theory says if you have a compared advantage in large airplane production you need to produce only large airplanes and then sell them in exchange for small ones okay because you're not that good at small ones okay so so that means if the two countries come together to trade the us will be selling large airplanes and uh in exchange for small ones to find the terms of trade the range that both countries will agree to you need to think about the bottom lines for for from both countries so for the us when we sell large airplanes what is the minimum amount of small airplanes we will accept when we sell you mean for small from brazil yeah from brazil when we sell large airplanes to brazil how many small ones do we need to get at at a minimum four thirds okay four thirds of small airplanes right because we'll say brazil you gotta pay me at least four thirds of small airplanes per large because otherwise it's lower than my cost of production right so we're saying the value of one large airplane needs to be greater than or equal to four thirds of small airplanes from the us's perspective right now if you can cover up the the four thirds of small airplanes with the less than or equal to sign just leave one l there so think from brazil's perspective brazil when they're buying large airplanes what is the maximum amount they're willing to pay in small three right so fo said they will say okay fine in us but to me the value of one large airplane got to be less than or equal to three small because if i pay you any more than three it's higher than my own cost of production i'm not gonna pay more than my own cost right so all of a sudden you find this range this is the special range in which both countries will benefit from trade both countries will agree to trade and as long as you stay within this range okay does that make sense so the bottom line then is the acceptable range for the terms of trade always lies in between the opportunity cost of the two countries for the same product okay so that's the principle i want you to remember okay all right so now let's look at d and c i'm d and e really quick okay so d says okay so before trade assumed the u.s produces and consumes 18 large airplanes and 16 small ones and brazil produces and consumes a large and six small ones and if the terms of trade is one large for too small show how trade is beneficial and the hint says what is the total world production compared to before trade now there's nothing special about 1816 8 and 6. i just arbitrarily picked a point on your ppf for the us and brazil so there's nothing special you can pick any point on that ppf and make this work okay now the way to show this according to the hint is to look at the total production in the world before and after trade so let's do that right so before trade the us is making 18 large and 16 small right and brazil is making eight large and six small so the world total production right because we assume that these are the only two producers for airplanes the world production is 26 large and 22 small right everybody with me how we got here okay now we said the terms of trade is one large for too small is that within the acceptable range for both countries well both countries agreed to this it is right it is between four thirds of small and three small so we know trade will happen so after trade happens we know that the us will specialize in large airplanes so we'll make 30 large and zero small right that's what trade theory tells us to do we should specialize in our compared advantage and brazil will make zero large and 30 small because 30 is the largest small amount they can largest amount of small airplanes they can make so the world all of a sudden has 30 large airplanes and 30 small airplanes to consume so we're better off remember there's no new technology or new um new resources we're we simply shifted where we put our resources to achieve more products okay so now you might say okay well fine you know the world is better off but i don't care about the world as a whole am i better off right so let me show you with the last minute we have question e okay so we might go over by a minute i apologize but this is important okay so do we individually each get better off okay so before trade we said okay the u.s is producing wait sorry okay 18 large roughly right here and 16 small okay so 18 16 call this point a okay this is where we were before trade right and we said this is how much we were producing and consuming because if we don't trade how much we produce is how much we get to consume right now brazil was at eight and six so call this point x okay so that was brazil's production and consumption point before trade everybody with me right now we said once we do allow trade to happen and at one large for too small both countries will agree to this term and then we know okay the us will specialize in large so we'll go to point b we'll produce at point b and brazil will produce at point y right we will only make what we have comparative advantage in okay again everybody with me so far okay now let's say we come together and trade we can trade any amount to show the same effect but to make things simple let's say the u.s sells 10 large airplanes to brazil at this term or trade one large for too small how many can we get back we can get 20 small airplanes back right so that means let's look at our consumption we made 30 large airplanes we sold 20 i'm sorry we sold 10 to brazil so that means we still have 20 large left for ourselves to consume right and the 10 large we sold to brazil got us 20 small airplanes back so our consumption all of a sudden is at 20 large and 20 small this is called point c that's our consumption well point c lies above our ppf what do we call a point that's above our ppf unattainable right so point c if we were to try to reach point c on our own given our resources and technology we would never get there however through trade we're consuming at a level higher than what we could do what what we could produce in fact if you connect b and c okay this red line becomes your consumption possibilities frontier for trade so with trade you get to consume at a higher level as soon as you you you trade even if you only sell one large airplane so you have 29 for yourself and you get two back that 29 and two is going to be a point slightly above your ppf i know i didn't do the 29 close enough right so it's going to be right there so as soon as you trade you start consuming higher than your ppf so the us is better off what about brazil well brazil produced 30 small ones they sold 20 to the us so they have 10 left and for those 20 small they got 10 large back so they are consuming here at point z they're also better off if you connect z and y that's their consumption pp i mean consumption possibilities frontier for trade so both countries ended up being better off through trade there's one last thing remember the us has absolute advantage in everything right but that didn't matter it's not about who can make more it's about if we're different if we're different trade will benefit both parties involved okay all right that makes sense okay i'm sorry for going over a few minutes um i'm gonna stop now and if you have questions i'll stay behind to answer otherwise next week okay don't forget uh we don't have class on monday but in order to keep our schedule i will have a video that i want you to watch before class on uh on wednesday okay so you do have your concept check quiz for chapters four and five and then that video before our class on wednesday okay all right thank you and i'll stay behind for any questions thank you

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Length: 43min 37sec (2617 seconds)

Published: Wed Jan 13 2021