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Welcome to Econ 325 Economics of Gender. Week 2 Beginning January 29. Monday, January 29. Note: All OCAs must be typed Return and discuss OCA1 # 4, page 12. Draw a separate graph for each question and describe the changes in the equilibrium wage rate and the number of workers.

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Welcome to econ 325 economics of gender

Welcome to Econ 325 Economics of Gender

Week 2

Beginning January 29


Monday january 29
Monday, January 29

  • Note: All OCAs must be typed

  • Return and discuss OCA1

    • # 4, page 12. Draw a separate graph for each question and describe the changes in the equilibrium wage rate and the number of workers.


Household as an economic unit chapter 3
Household as an Economic Unit (Chapter 3)

  • There are two Individuals: Chris & Pat

    • Chris has absolute advantage in market work if in given amount of time he/she can earn more income than Pat.

    • Chris has absolute advantage in home work if in a given amount of time he/she can produce higher valued home work thanPat.


Who has absolute advantage in market work

Pat earns $20/hour at his/her job.

Chris earns $25/hour at his/her job.

Who has absolute advantage in market work?


Comparative advantage
Comparative Advantage

  • If Pat’s opportunity cost of producing one dollar worth of homemade good is lower than that of Chris’s, Pat has comparative advantage in home work.


Who has comparative advantage in home work

For every dollar of home good he/she produces Pat has to give up $5 earned income

For every dollar of home good he/she produces Chris has to give up $3 earned income

Who has comparative advantage in home work?


Welcome to econ 325 economics of gender
ICA3 give up $5 earned income

  • Study Chapters 1 though 3 (including the appendix)


Wednesday january 31
Wednesday, January 31 give up $5 earned income

  • Paper topic is due February 16

    • Need at least 2 resources, one of which will be where you will get your numbers from

  • Exam 1 February 12

  • $1000 scholarship!?


Return and discuss ica3
Return and discuss ICA3 give up $5 earned income

1. Pat has absolute advantage in _______.

Chris has absolute advantage in ______.


Discuss ica3
Discuss ICA3 give up $5 earned income

2. Who has comparative advantage in home good?


Discuss ica31
Discuss ICA3 give up $5 earned income

  • Notes

    • Just because one has absolute advantage it does not mean that he also has comparative advantage.

    • When there are 2 individuals and 2 tasks

      • It is possible for one individual to have absolute advantage in both tasks

      • It is not possible for one individual to have comparative advantage in both tasks.

      • If one has comparative advantage in on task, the other person will have comparative advantage in the second task


Discuss ica3 3
Discuss ICA3 give up $5 earned income3.


Discuss ica32
Discuss ICA3 give up $5 earned income

4. Pat should work outside home and Chris should work at home (based on comparative advantage)

  • Pat will make $800 income in 40 hours

  • Chris will produce $600 of home good in 40 hours


Discuss ica33
Discuss ICA3 give up $5 earned income

5. The terms of trade depends on opportunity cost

  • Opp. cost of $1 of home good

    • For Pat = $2 of income

    • For Chris = $1 of income

  • Chris would want to trade $1 of home good for more than $1 of income. Why?

  • Pat would want to receive more than $1 worth of home good for $2 of income. Why?

  • The range of mutually beneficial trade

    • $2 income > $1 home good > $1 income

      • $1.5 income for $ 1 of home good is good, or

      • $1.75 income for $1 of home good is good

      • Or any multiple of these terms is good too.

  • How about $75 income for $50 of home good?


Discuss ica3 6
Discuss ICA3 give up $5 earned income6.


Production possibilities frontier ppf appendix of chapter 3
Production Possibilities Frontier give up $5 earned income(PPF, Appendix of Chapter 3)

  • An individual’s PPF shows different combinations of market good (earned income) and home good the individual can produce efficiently in a given period of time.

  • Pat & Chris’s PPF

    • Slope

      • What does it measure?

    • Unattainable points

    • Shifts


Derivation of the household ppf
Derivation of the household PPF give up $5 earned income

  • Pat and Chris form a household

  • What is the value of market good at the vertical intercept?

  • Starting at the point where both individuals work full time (the vertical intercept), who is more likely to reduce his/her hours of work at his/her job to produce one unit of home good?

  • Horizontal intercept


Friday february 2
Friday, February 2 give up $5 earned income

  • Paper topic is due February 16

    • Need at least 2 resources, one of which will be where you will get your numbers from

  • Exam 1 February 12

  • Study Chapters 1- 3

  • Study Article 1

  • Expect ICA/OCA on Monday


Gains of household formation
Gains of household formation give up $5 earned income

  • Individual PPFs/ household PPF

  • Household per capita PPF

  • Is this per capita PPF better than the individual PPFs? Why?

  • Some points that were unattainable before become attainable


What if both individual had the same ppf
What if both individual had the same PPF? give up $5 earned income

  • Who has comparative advantage in home good? Market good?

  • How would the per capita household PPF look?

  • No gains from forming a household

  • The more different the PPFs ==> the higher the comparative advantage ==> the higher the gains of household formation


Suppose pat and chris form a household
Suppose Pat and Chris form a household give up $5 earned income

  • How are they going to allocate their time between production of market good and home good?

  • Where are they going to be on their household PPF?


A household s indifference curve
A household’s indifference curve give up $5 earned income

  • Shows different combinations of home good and market good that equally satisfy the household

  • Example

  • Slope

  • Why is the slope declining?

  • Higher/lower satisfaction

  • A households indifference curves can’t intersect. Why?