CHAPTER 4 Gains from Trade

SPECIALIZATION Specialization: _________________________________________________________________ Levels of Specialization: an area’s level of specialization depends on its _________________________. Areas with __________________ are more specialized due to _________________________ More rural areas are ____________specialized due to ____________________________ Specialization improves productivity through _________________________________________. Division of labor: _________________________ into different specialized jobs in order to ______________________________________________________ Increases speed of production Improves quality of products Improves standard of living Example: High School teachers specialize in their subjects

SPECIALIZATION ENCOURAGES TRADE Specializing in one good or service increases the need for other goods and services since no one is producing everything they need for themselves. THUS: Specialization; __________________________________________________ ______________________________________________________________they obtain these things by trading their goods/services for other goods/services Money______________________________________________.

TRADE CREATES ECONOMIC INTERDEPENDENCE Economic interdependence: ____________________________________ or countries to _________________ the goods or services ____________________ produce yourself. Countries must depend on each other because some lack the resources to produce certain goods or services Trade Barriers: _____________________________________ between peoples or nations and thus force self-sufficiency Ex: ________________________________ that force Americans to buy goods made in the U.S.A Ex: Typical American breakfast

GAINING FROM TRADE The Two Types of Advantages from Trade: Absolute Advantage: the ability to be _________________________ in the production of a good or service Comparative Advantage: the ability to produce a product at a__________________________________________________. Comparative Advantage 1 Capitalism, Comparative Advantage & Absolute Advantage Not always better to be the best at everything

TRADE MAKES US WEALTHIER 3 Ways Trade Improves Wealth: ____________________________________________________________________ Not really talking about price ________________________________________________ Millions of choices for burgers, Chinese food, frozen yogurt, auto insurance, etc., __________________________________________________ Opens up markets to less costly goods Opens up opportunities to _________________________which is a ____________ production method Cheaper production costs means passing on those savings to the consumers by offering lower prices.

THE NEGATIVE SIDE TO TRADE (BUT NOT REALLY) Having better comparative advantage _______________________________________. People lose jobs This is why some people _________________ _______________ trade can force people to ____________________ which _________ makes them ______________________. If you’re making yourself more marketable…what does that mean you just increased?