Why Nations Trade

Why don’t we just make everything ourselves? Unequal distribution of resources Natural resources are prolific in some areas but nonexistent in others Human capital – amount of human capital depends on need (high literacy rate) Physical capital Economic activity patterns The need for trade - specialization

Costa Rica coffee production

Economic Activity patterns Producing, exchanging, consuming, saving, investing

Human capital India/Filipino call center –330,000; 350,000

Percentage of oil reserves

Physical capital Infrastructure – roads, bridges, machinery

Absolute Advantage Person or nation can produce more of a given product Read 443

Comparative Advantage David Ricardo – economist who developed the idea Nation that has the lower opportunity cost in producing a good If a nation has a C.A. it should produce a good.

Law of Comparative Advantage Nation in better off when it produces good and services for which it has a comparative advantage.

Ideas I think you know already Export Import US is world leader in both Specialization Why companies leave (especially the US)