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Understanding Input vs. Output Economics

Learn about input vs. output problems and how they impact production efficiency and resource allocation in economics. Explore absolute advantage and comparative advantage concepts to optimize output and reduce opportunity costs effectively.

stephenbennett
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Understanding Input vs. Output Economics

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  1. Input vs. Output

  2. Input vs. Output • Output problems state that you get a certain amount of product out of a given input. • Examples miles per gallon, pieces of gum per dollar... • Input problems state that it takes a certain amount of input to get a given product. • Examples are hours to do a job, apples to make a pie,

  3. For output problems you look at if one nation (individual/company) can produce more output with the same resources as the other. Examples: Output: (Tons produced per hour) Absolute Advantage

  4. Comparative Advantage • One nation (individual/company) can produce a good at a lower opportunity cost than the other. • This comes into play when one individual (nation, company....) has the absolute advantage in both.

  5. Comparative Advantage • Output method: put the output of each product over the output of the other product for the same person. This makes a fraction. Look at the opportunity cost. The person with the lowest opportunity cost should produce the good that costs the least.

  6. Comparative Advantage • Put the output of each product over the output of the other product.

  7. Comparative Advantage • Input Method: divide the input required for each product into the input for the other product. Then take the one with the lowest opportunity cost • Reduce it:  5/3 is less than 6/3 so Jeff should produce pie. 3/6 is less than 3/5 so Judy should produce Juice.

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