Chapter 2 Econ and David Ricardo
Margin: border between what have and what extra
Individuals
ex. extra sleep in the morning means costs and benefits
ex. extra time spent watching TV has cost and benefit
Businesses
Marginal Cost -- extra cost for each item: ex. cost per additional worker
marginal revenue: extra revenue added as something added: ex. extra revenue from each additional worker added
MR and MC
MR>MC -- keep adding
MR=MC -- stop
MR<MC -- take away
Diminishing marginal utility
as you keep adding, the benefit of the additional item decreases (law of increasing costs)
Government
Needs to decide when cost of something is more than benefit too
Total utility -- sum of all utility
David Ricardo
Personal Life
Ideas
Market changes needed
Principles of Political Economy and Taxation -- 1817
Comparative advantage -- that although one country has an absolute advantage in two items, they may benefit from the trade of one of those with another country. This is because the country with the absolute advantage is probably comparatively better at producing one of the goods than the other in comparison with the other country.
Anti tariffs that create other "inefficient" incentives
Economic rent -- money spent on something that is over its worth
His idea was that the price of the product will depend on the extra product or rent is made from the less suitable factory resources. For example: in the beginning of time population was small so only needed to use the best possible land. As population increases and the second best land had to be used, it is less productive so prices will increase because the ratio of food to people is smaller. As a result, this will benefit the rich people with the good land because that will continue to be more productive, but demand will be higher so they get more money per product.
3 groups of people: landlords, industrialists, and tenant farmers/ workers
Needed to get rid of Corn laws -- new laws that protected certain industries from foreign competition with tariffs. These laws did not allow for comparative advantage.
Thought trade would help decreases prices for consumers.
did not change
son of Jewish stock broker
Good friends with Malthus
didn't attend college
Say's law -- supply will always meet some demand
creating more supply means making more money which means creating more demand for goods