This island has so many valuable resources for me. Since I need to survive on this island, I might as well grow mangos and lemongrass.
M&M: The Perfect Team
Ugh!! Why am I not growing as much lemongrass. I can produce 60 mangos but only 20 lemongrass!!
A few moments later...
OMG! Great! I'm pissed off because I can't grow more lemongrass and now I have some *!ING stranger trying to be friendly.
Hello, I'm Mark. I guess I'm not the only person living on this island huh?
Woah, there. There's no need to be rude. I thought I was the only person on this island, but it looks like I'm not. I can see you're struggling with growing lemongrass.
Yeah, I am. I'm not growing as much as I want to compared to my mangos. I don't know what to do.
Well, at least we're finally making conversation. Before I can help you, what is your name sweetheart?
My name is Michelle. now can you help me?
Great! Now that that's out of the way, baby, you know that we are on the island together, so why not work together?
Damn, stop with the "sweetheart" and "baby" and get to the point?!!
Okay! What I'm trying to say is that I also grow mangos and lemongrass. But unlike you, I can grow more lemongrass than mangos. I specialize in lemongrass and you specialize in mangos.
Soo..how much lemongrass and mangos do you produce?
I don't know why this is important but I produce 60 mangos and 20 lemongrass.
Perfect! And I produce 40 mangos and 80 lemongrass. This means I hold the comparative advantage in producing mangos because my opportunity cost is lower, but I also hold the absolute advantage in producing lemongrass because I produce more.
Wait, what's a comparative advantage and an absolute advantage?
And an absolute advantage is the ability of an individual to carry out a economic activity more efficiently that another individual or group.
A comparative advantage is the ability to produce goods and services at a lower opportunity cost than that of trade partners.
So based on that, we can incorporate the division of labor method and work on what we do best, so that we can be more efficient in our production.
Okay! enough chatter. Lets get to this!
Fine, fine. but did you know that economic interdependence is a high degree of division of labor, where people depend on other people to produce most of the goods and services required to sustain life and living?
Okay! lets get to it. First, we need to know what we make originally. After that, see the opportunity cost of what we grow. Then, we can figure out how much we can make with or without specialization. I can plan this out before we get started.
Okay, sure do your thing.
This is if they do all mangos.
This is if they do all lemongrass
As shown, I hold the comparative advantage in producing mangos because my opportunity cost is lower, but Michelle holds the comparative advantage in producing lemongrass because her opportunity cost is lower.
After understanding who produces more of what, Michelle and Mark go on to plant the mangos and lemongrass without any specialization, and with specialization to see if working on what they produce best will ultimately be a positive outcome.
As you can see, without specialization, Michelle produces 30 mangos and 10 lemongrass,while Mark produces 20 mangos and 40 lemongrass, producing all together 50 mangos and 50 lemongrass.
No specialization vs Specialization
However, with specialization, Michelle was able to produce 60 mangos, while Mark was able to produce 80 lemongrass. this tremendously boosts up their production of mangos and lemongrass together.
Wow, Mark your idea really worked and we were able to produce so much mangos and lemongrass from us specializing. Thanks soo much. We make a great team.
,I knew it would work! I had faith in you this whole time. No problem baby, and hell yeah we make an awesome team. I could definitely get used to this.
This is a beautiful sunset. I'm so grateful to have you come into my life and help me Mark.
Sweetheart, I'm grateful to have found you. We did it!
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