Module Comparative Advantage and Trade KRUGMAN'S MACROECONOMICS for AP* 4 Margaret Ray and David Anderson.

Slides:

Advertisements

Similar presentations

Module Comparative Advantage and Trade

Advertisements

KRUGMAN'S MACROECONOMICS for AP* Module The Study of Economics 1 Margaret Ray and David Anderson.

Comparative Advantage and Trade Why do economies trade?

Module 4-”Comparative Advantage and Trade”

AP Economics Mr. Bernstein Module 4: Comparative Advantage and Trade September 22, 2014.

Module Supply and Demand: Changes in Equilibrium

Module The Production Possibilities Curve Model

Module The Meaning and Calculation of Unemployment

Module Exchange Rate Policy KRUGMAN'S MACROECONOMICS for AP* 43 Margaret Ray and David Anderson.

Module Capital Flows and the Balance of Payments KRUGMAN'S MACROECONOMICS for AP* 41 Margaret Ray and David Anderson.

Module Exchange Rate Policy KRUGMAN'S MACROECONOMICS for AP* 43 Margaret Ray and David Anderson.

Module The Meaning and Calculation of Unemployment KRUGMAN'S MACROECONOMICS for AP* 12 Margaret Ray and David Anderson.

27 Module The Federal Reserve: Monetary Policy KRUGMAN'S

Module Equilibrium in the Aggregate Demand- Aggregate Supply Model

Module 29 The Market for Loanable Funds KRUGMAN'S

Module Comparative Advantage and Trade KRUGMAN'S MACROECONOMICS for AP* 4 Margaret Ray and David Anderson.

Specialization & Comparative Advantage Comparative Advantage.

Module Interpreting Real Gross Domestic Product KRUGMAN'S MACROECONOMICS for AP* 11 Margaret Ray and David Anderson.

Module The Circular Flow and Gross Domestic Product KRUGMAN'S MACROECONOMICS for AP* 10 Margaret Ray and David Anderson.

Module Economic Growth in Macroeconomic Models KRUGMAN'S MACROECONOMICS for AP* 40 Margaret Ray and David Anderson.

In Class – Week 2 Gains from Exchange Why do people willingly trade?

Module Productivity and Growth KRUGMAN'S MACROECONOMICS for AP* 38 Margaret Ray and David Anderson.

Module The Circular Flow and Gross Domestic Product KRUGMAN'S MACROECONOMICS for AP* 10 Margaret Ray and David Anderson.

Module The Measurement and Calculation of Inflation KRUGMAN'S MACROECONOMICS for AP* 15 Margaret Ray and David Anderson.

Module Supply and Demand: Introduction and Demand KRUGMAN'S MACROECONOMICS for AP* 5 Margaret Ray and David Anderson.

International Trade Trade between China and Italy ◦ China  makes everything cheaper, faster, better  why trade with Italy? Continuing growth of international.

U.S. PPF for Cars and T-Shirts Cars T-Shirts U.S has 50,000 Hours of Labor with which it can produce either cars.

Free Trade Theory Why Nations Trade. Why Trade? Basics of Trade Defined: 2 Countries engage in economic activity Exports: goods/services leave country.

Module The Definition and Measurement of Money KRUGMAN'S MACROECONOMICS for AP* 23 Margaret Ray and David Anderson.

Module The Modern Macroeconomic Consensus KRUGMAN'S MACROECONOMICS for AP* 36 Margaret Ray and David Anderson.

Module The Production Possibilities Curve Model KRUGMAN'S MACROECONOMICS for AP* 3 Margaret Ray and David Anderson.

Module Comparative Advantage and Trade

International Trade 1. Why Nations Trade  Believe products received worth more than what they give up  Increases variety of goods available  Sometimes.

Module Supply and Demand: Quantity Controls KRUGMAN'S MACROECONOMICS for AP* 9 Margaret Ray and David Anderson.

Module The Meaning and Calculation of Unemployment KRUGMAN'S MACROECONOMICS for AP* 13 Margaret Ray and David Anderson.

Module Capital Flows and the Balance of Payments KRUGMAN'S MACROECONOMICS for AP* 41 Margaret Ray and David Anderson.

Module Monetary Policy and the Interest Rate KRUGMAN'S MACROECONOMICS for AP* 31 Margaret Ray and David Anderson.

Module Long-run Economic Growth KRUGMAN'S MACROECONOMICS for AP* 37 Margaret Ray and David Anderson.

SESSION 14: ABSOLUTE ADVANTAGE & COMPARATIVE ADVANTAGE Talking Points Absolute Advantage & Comparative Advantage 1. Trade increases the value society receives.

Module Supply and Demand: Quantity Controls KRUGMAN'S MACROECONOMICS for AP* 9 Margaret Ray and David Anderson.

Module Comparative Advantage and Trade KRUGMAN'S MACROECONOMICS for AP* 4 Margaret Ray and David Anderson.

Chapter 2 Economics, 8th Edition Boyes/Melvin.  Opportunity cost: the value of the highest- valued alternative that must be forgone when a choice is.

KRUGMAN'S MACROECONOMICS for AP* Module The Study of Economics 1 Margaret Ray and David Anderson NEW PICTURE TO COME.

Module Comparative Advantage and Trade KRUGMAN'S MACROECONOMICS for AP* 4 Margaret Ray and David Anderson.

Comparative Advantage. Should trade be promoted?

Module The Meaning and Calculation of Unemployment

KRUGMAN'S MACROECONOMICS for AP* Module The Study of Economics 1 Margaret Ray and David Anderson NEW PICTURE TO COME.

Module Aggregate Supply: Introduction and Determinants KRUGMAN'S MACROECONOMICS for AP* 18 Margaret Ray and David Anderson.

Module Long-run Economic Growth KRUGMAN'S MACROECONOMICS for AP* 37 Margaret Ray and David Anderson.

ROLL CALL Would you rather have a Coke or Pepsi?.

Module 4 Comparative Advantage and Trade

Mr. Bernstein Module 4: Comparative Advantage and Trade September 2017

Module 4-”Comparative Advantage and Trade”

Module Comparative Advantage and Trade

How does trade lead to gains for an individual or an economy?

KRUGMAN’S Economics for AP® S E C O N D E D I T I O N.

Absolute vs. Comparative

Module The Study of Economics

Comparative Advantage & Trade

Module Comparative Advantage and Trade

Trade Analysis Analyzing Trade Problems using a 4-step process

Gains from Trade : Comparative Advantage Paper and Pencil out for Quiz

AP ECONOMICS: August 31 Learning Target In order to understand why people and countries specialize and trade, I will learn the principles of absolute.

Module Comparative Advantage and Trade

Choice, Opportunity Costs, and Specialization

AP ECONOMICS: September 6

Module 4 Comparative Advantage & Trade

Module The Production Possibilities Curve Model

Comparative Advantage FRQ B #1; 2008 #3

Presentation transcript:

Module Comparative Advantage and Trade KRUGMAN'S MACROECONOMICS for AP* 4 Margaret Ray and David Anderson

What you will learn in this Module : How trade leads to gains for an individual or an economy The difference between absolute advantage and comparative advantage How comparative advantage leads to gains from trade in the global marketplace

Gains from Trade Trade Gains from trade Specialization The importance of markets

Comparative Advantage and Gains from Trade Comparative Advantage Terms of Trade Oregon Timber Apples 10 Washington 5 Timber Apples 20 40

Hours to produce 1 unit of Donuts Hours to Produce 1 Unit of Coffee Producing 1 unit of Donuts cost Producing 1 unit of coffee cost Springfield 84 Shelbyville 24 8 Determine the opportunity cost for both cities Absolute Advantage

Hours to produce 1 unit of Donuts Hours to Produce 1 Unit of Coffee Producing 1 unit of Donuts cost Producing 1 unit of coffee cost Springfield Units of Coffee½ Units of Donuts Shelbyville Units of Coffee1/3 Units of Donuts

Production Possibilities for Two Countries

Will these two countries gain from trade if 100 units of malaria medicine are traded for 200 cotton shirts? To find out: 1. Calculate the opportunity costs of production for each country 2. Determine the comparative advantage for each country 3. Determine if the terms of trade are mutually beneficial Production Possibilities for Two Countries

BangladeshUnited States Cotton Shirts (C) 750C = 250M 1C = 1/3M 1000C =1000M 1C = 1M Malaria Medicine (M) 250M = 750C 1M = 3C 1000M =1000C 1M = 1C Production Possibilities for Two Countries

BangladeshUnited States Cotton Shirts (C) 750C = 250M 1C = 1/3M 1000C =1000M 1C = 1M Malaria Medicine (M) 250M = 750C 1M = 3C 1000M =1000C 1M = 1C The United States has a comparative advantage in Malaria Medicine (M) because they only give up 1 cotton shirt while Bangladesh must give up 3 cotton shirts to gain 1 unit of medicine. Bangladesh has a comparative advantage in Cotton Shirts (C) because they only give up 1/3 unit of medicine while The United States must give up 1 unit of medicine to gain 1 cotton shirt. Production Possibilities for Two Countries

BangladeshUnited States Cotton Shirts (C) 750C = 250M 1C = 1/3M 1000C =1000M 1C = 1M Malaria Medicine (M) 250M = 750C 1M = 3C 1000M =1000C 1M = 1C The terms of trade are mutually beneficial as long as they are between the two countries’ opportunity costs. For example, any amount of medicine greater than 1/3 and less than 1 traded for 1 cotton shirt would represent mutually beneficial terms of trade. Likewise, any number of cotton shirts greater than 1 and less than 3 traded for 1 unit of medicine would represent mutually beneficial terms of trade. Production Possibilities for Two Countries