Lucy’s Cuban- American husband drumming on the bongo.

Slides:

Advertisements

Similar presentations

International Trade Who gains and who loses from free trade among countries? What are the arguments that people use to advocate trade restrictions? Countries.

Advertisements

Unit Five: International Trade Topic: Absolute and Comparative Advantage.

FREE TRADE What is it? Benefits Active Agreements Arguments Against APHG Copeland 2011.

Theory of Theory of comparative advantage David Ricardo.

Gains to Trade. Two country model with constant costs Assume just two products and two countries. With constant costs, the PPCs are straight lines (first.

Mr. Mayer AP Macroeconomics Comparative Advantage.

AP Macroeconomics Comparative Advantage. Ricky Ricardo Lucy’s Cuban- American husband drumming on the bongo.

Mr. Gerdes’ AP Macroeconomics Comparative Advantage.

Absolute and Comparative Advantage AP Macroeconomics © Robin Foster.

ECON201, Maclachlan, Fall Some Tools of Economists Chapter 2.

The Origins of Trade Theory Professor Bryson Marriott School.

The Origins of Trade Theory Professor Bryson Marriott School.

ECON202, Maclachlan, Spring Interdependence & Gains from Trade Week 2.

Topic #6: The Gains from Trade Dr David Penn Associate Professor of Economics and Director of the Business and Economic Research Center.

Agenda Graph Making Review Globalization, Trade, and Protectionism Notes Pass out Progress Reports Progress Reports are due by Wednesday.

Dishwashing (# of sink loads) Sweeping (# of trash loads) Betsy23 Bert11.

AP Macroeconomics and Regular Economics Comparative Advantage (courtesy of Mr. Mayer)

AP Macroeconomics August 2014

Free Trade Theory Why Nations Trade.

Why Nations Trade? If we are better at making everything, why would we trade with anyone else?

International Trade. Scenario 1  You are starting a bakery with a partner  It takes you 1 hour to make 80 muffins and 1 hour to make 20 cookies  Your.

Dr. David P Echevarria1All Rights Reserved LECTURE #2: MICROECONOMICS CHAPTER 3 Specialization Comparative Advantage Opportunity Costs.

In the modern global economy:... each country could be economically self-sufficient (producing everything it consumes). In fact, countries tend to specialize.

Chapter Scarcity and Choice 2. Chapter How People Interact Principle 5: Trade can make everyone better off Trade – Specialization Allows each person/country.

International Trade Economics Mr. Hellums. Warm up- You Choose… You have $300 to spend and it will buy: (a)One U.S.-made bicycle and one U.S.-made cell.

Absolute vs. Comparative. Definitions Absolute Advantage= the product or resource that a person, group, or society can produce more of (absolutely). Comparative.

Why Everybody Trades: Comparative Advantage

Chapter 3 Exchange and Markets. Consider your typical day –You wake up to an alarm clock made in Korea. –You pour yourself orange juice made from Florida.

Comparative Advantage. US ECONOMY OTHER NATIONAL ECONOMIES Goods and services Capital and labor Information technology Money Global Economy with Trade.

Section 2 Production Possibility Frontier & Trade Chapter 2: pages

International Trade Comparative and Absolute Advantage ©2012, TESCCC.

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

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.

GLOBAL ECONOMY UNIT 3. Household Chores (Output per hour) Dishwashing (Number of sink loads) Sweeping (Number of trash loads) Betsy23 Bert11 The Parents’

The importance of international trade. Why trade?  1. Sell off unwanted surpluses.

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

Defined: International trade is the exchange of capital, goods, and services across international borders or territories. Important: When we say countries.

7 th Grade Civics Miss Smith *pgs (21.4).

Comparative Advantage and the Gains from Trade © 2003 South-Western/Thomson Learning.

International Trade The Law of Comparative advantage Sec. 4.1.

AP Macroeconomics Comparative Advantage FRQ B #1; 2008 #3.

Trade Analysis Analyzing Trade Problems using a 4-step process.

Economics Journal Global Economics Week of Nov

Production Possibilities Absolute and Comparative Advantage.

Chapter 3 The Economic Problem. Production Possibilities Curve (Frontier): Maximum amounts of 2 goods that can be produced at full employment of all resources.

. Chapter 6- Comparative Advantage SECTION 1 © 2001 by Prentice Hall, Inc. Objective – Students will be able to answer questions regarding comparative.

Please answer the following question in your Current Events Notebook. Why do we buy things from other countries that you know we can produce just as inexpensively.

Comparative and Absolute Advantage. Absolute Advantage The ability of a country, individual, company or region to produce a good or service at a lower.

EF310: International Trade and Business

Chapter 21 Section 4 (Pgs ) Living in a World Economy

Absolute and Comparative Advantage

Comparative and Absolute Advantage

Absolute v. Comparative Advantage

International Trade.

Absolute vs. Comparative

Why Nations Trade? If we are better at making everything, why would we trade with anyone else?

Mr. Mayer AP Macroeconomics

Trade Analysis Analyzing Trade Problems using a 4-step process

Mr. Mayer AP Macroeconomics

Why Nations Trade? If we are better at making everything, why would we trade with anyone else?

Living in a World Economy

Why Nations Trade.

Comparative and Absolute Advantage

Free Markets and Utility: Adam Smith

Comparative Advantage

Comparative Advantage FRQ B #1; 2008 #3

Why Nations Trade? If we are better at making everything, why would we trade with anyone else?

Absolute v. Comparative Advantage

Unit 1 Comparative Advantage

Presentation transcript:

Lucy’s Cuban- American husband drumming on the bongo.

English economist responsible for promoting comparative advantage as the basis of trade. No relation to Ricky Ricardo.

Absolute Advantage Whomever can produce the most of a certain good Comparative Advantage Whomever can produce a good at the lowest opportunity cost (you give up the least amount of the other good – it “costs” you less to produce a certain good)

Countries can be better off if they will produce in what they have a comparative advantage and then trade with others for whatever else they want/need.

Assume David Ricardo and Ricky Ricardo are going to throw a party for economists. They will write songs and make cookies for the party.

David Ricardo Ricky Ricardo Songs24 Cookies68

David Ricardo Ricky Ricardo Songs24 Cookies68 Who has the absolute advantage in writing songs? Who has the absolute advantage in baking cookies?

If one person/country has the absolute advantage for BOTH goods, then you must find comparative advantage

1 song costs David 3 cookies 1 song costs Ricky 2 cookies Ricky can write songs more cheaply, so Ricky should write songs and David should bake cookies Ricky has the “comparative advantage” in writing songs David has the “comparative advantage” in baking cookies Songs Cookies  Simplify 

Ricky should write songs, David should bake cookies, and they should trade songs for cookies. BUT, how many cookies should one song equal?

When Ricky writes one song, he gives up the opportunity of baking 2 cookies, so he wants to sell his songs for MORE than 2 cookies to make a profit David could write a song for the cost of 3 cookies, so he wants to buy a song for LESS than 3 cookies to save 3 cookies > 1 song > 2 cookies 1 song = 2.5 cookies To find how much one cookie should equal, find the reciprocal of cookie = 2/5 song

If Ricky writes 4 songs and trades those for cookies, then he can have either 4 songs OR 10 cookies If David bakes cookies and trades those for songs, then he can have either 6 cookies OR 2.4 songs Before Trade: After Trade: