Benefits and Issues of International Trade Unit 17.1

Resource Distribution and Specialization No one country has all it needs Natural Resources Human Capital Physical Capital Entrepreneurship Specialization Interdependence

Absolute and Comparative Advantage Absolute Advantage Whoever has the greatest production in that specific area Comparative Advantage Whoever has the lower opportunity cost of making the item Law of Comparative Advantage Countries gain when they produce items that have the lowest opportunity cost

International Trade Affects the National Economy Exports International demand shifts the demand curve to the right, raising prices and increasing quantity. While this makes the item more expensive in the home country, it creates jobs and bring in capital. Imports International supply of goods shifts the supply curve to the right, lowering prices and creating competition to produce better locally (though this often leads to job losses)