Why We Learn about Why We Learn about EconomicsEconomics

The story of Robinson Crusoe The story of Robinson Crusoe and Wilson, the nativeand Wilson, the native

Robinson CrusoeRobinson Crusoe

• Stranded on a deserted islandStranded on a deserted island– Has very limited resourcesHas very limited resources– Needs to surviveNeeds to survive

• Learns how to build shelter using Learns how to build shelter using palms from palm treespalms from palm trees

• Learns how to fishLearns how to fish– In one hour, Robinson canIn one hour, Robinson can

•Catch 2 fish, orCatch 2 fish, or•Get 4 palmsGet 4 palms

Robinson CrusoeRobinson Crusoe

• Robinson can only work for 8 hours a day or Robinson can only work for 8 hours a day or else the sun will be too much and he will else the sun will be too much and he will get dehydratedget dehydrated

• In one day, Robinson canIn one day, Robinson can– Catch 16 fish, orCatch 16 fish, or– Get 32 palmsGet 32 palms

• Robinson decides to split his time and Robinson decides to split his time and spend 4 hours fishing and 4 hours palmingspend 4 hours fishing and 4 hours palming– 8 fish8 fish– 16 palms16 palms

• Robinson is very happyRobinson is very happy

Robinson CrusoeRobinson Crusoe

• Little did Robinson know, but there was another Little did Robinson know, but there was another person on the island who had been there for a person on the island who had been there for a very long time named Wilsonvery long time named Wilson

• Wilson can also fish, but is real good at palmingWilson can also fish, but is real good at palming– In one hour, Wilson can In one hour, Wilson can

• Catch 2 fishCatch 2 fish• Get 8 palmsGet 8 palms

– One dayOne day• 16 fish16 fish• 64 palms64 palms

– Splitting his timeSplitting his time• 8 fish8 fish• 32 palms32 palms

Robinson and WilsonRobinson and Wilson

• Robinson and Wilson meet and start Robinson and Wilson meet and start talking about their skillstalking about their skills

• The two decide that they should help The two decide that they should help each other outeach other out

• Robinson offer Wilson 1 fish for 3 Robinson offer Wilson 1 fish for 3 palmspalms

• Should they trade?????Should they trade?????FishFish PalmsPalms

RobinsonRobinson 1F=2P1F=2P 1P=1/2F1P=1/2F

WilsonWilson 1F=4P1F=4P 1P=1/4F1P=1/4F

TradeTrade

• What do they gain?What do they gain?RobinsoRobinsonn

WilsonWilson

BringsBrings 16F16F 0P0P 0F0F 64 P64 P

GivesGives 8F8F 24P24P

GetsGets 24P24P 8F8F

LeavesLeaves 8F8F 24P24P 8F8F 40P40P