Sydney Chasteen Ramie Goldey Austin Isaacs Chapter 17 section 1 Sydney Chasteen Ramie Goldey Austin Isaacs

Absolute advantage- the ability of one person or nation to produce a particular good at a lower cost than another person or nation. Vocabulary

comparative advantage- the ability of one person pr nation to produce a particular good at an opportunity cost that is lower than that of another person or nation.

law of comparative advantage- the idea that a nation is better off when it produces goods and services for which it has a comparative advantage.

export- a good that is sent to another country for sale. import- a good that is brought in from another country for sale.

Notes most things you buy are bought from another country. U.S produces many things such as jeans, machinery, and some types of computers.

U.S doesn’t produce most of the worlds video game systems or VCRs. The answer lies resources and their distribution. The unequal distribution of recourses prevents countries from producing everything their people need and want.

The recourses that are used to make goods and services are called factors of production. They include national resources, human resources, and capital resources.

Natural resources include those materials found in nature that people use to make goods and provide goods and services. Natural resources include arable land, mineral deposits in, oil and gas deposits, water, and raw materials.

A region with fertile soil has an economy based on agriculture. A region with large oil and natural gases such as Asia, is likely to have an economy based income from sale of these products.

Natural resources as well as climate and location, help determine what goods and services an economy produces. They are not, however, the only influences.

Human capital is knowledge and skills gained by human workers, through education and experience. Every job includes some human capital.

For example to be a surgeon you must learn anatomy and acquire surgical skills. To be a taxi driver, you must know the layout of the city streets.

A country with a high literacy rate is likely to have an educated, skilled work force. Physical capital includes objects made by men and women that are used go produce goods and services.

Examples of physical capital include factories, machinery, and computers. It also includes the public infrastructure, such as roads and bridges.

Physical capital includes objects made by men and women that are used to produce goods and services.

Examples of physical capital include factories, machinery, and computers. This also includes public infrastructure, such as roads and bridges.

One measure of physical capital is the number of telephones a country has in relation to its population .

The number of telephones can indicate the extent of a country’s communications system. Similarly the number of airports can indicate the transportation in a country.

Each country in world possesses different types and quantities of land, labor, and capital resources. Some of these resources are determined by nature.

A nations culture and history affect its human and physical resources A nations culture and history affect its human and physical resources. For example, if a nation has experienced many civil wars, it may not be able to develop its resources.

The United Kingdom has over twice as many airports as Peru despite its smaller land area, suggesting that the United Kingdom has more physical capital.

Specialization occurs when producers either individuals or nations decide to produce only certain goods and services, rather than all the goods and services they need.

Specialization is determined by a nations natural resources and by its human and physical capital

In the United States we grow wheat, soybeans, and other crops for which we have appropriate soil and climate conditions.

When nations specialize in producing only certain goods, they obtain the goods they don’t or cant produce through trade.

Trading relationships benefit countries with abundant resources as well as countries with few resources.

Costa Rica specializes in producing coffee and exports a large quantity of coffee beans. The country the uses the money it earns to buy products.

In the nineteenth century, British political economist David Ricardo argued that the key to determining which country should produce which goods is opportunity cost.

Opportunity cost is what you give up in order to produce a certain product. The nation that has the lower opportunity is comparative advantage.

How do nations obtain goods and services for which they lack adequate resources? They maintain enough natural resources.

The United States is the worlds leading exporter, Who are they followed by? Germany & Japan

How much does the United States import in goods and services? $900 Billion

What services are also traded in the world market? Education, information services, computer & data processing, financial services and medical care.

What is the definition of Export? A good sent to another country for sale.

When does a country have the most advantages? When it produces goods and services for which it has a cooperative advantage.

What does the Physical Capital include? Objects made by men and women that are used to produce goods and services.

When does Specialization occur? When producers decide to produce only certain goods or services.

What is Absolute Advantage? When someone can produce a particular good at a lower cost than another person or nation.

What could be an example of an export? Rice, beans, water or clothes.