Bellwork 1.Pay yourself if you have a token. Pay your Monday bills. Don’t forget to pay for your wedding if you got married. 2.Log in to the classroom. The password is ____________ 3.Check on your stocks. 4.Type of the definition of Opportunity Cost into Socrative Student short response. Don’t forget to write your name!

Today’s Lesson Agenda Community Service Reminder Review Quiz 7 Specialization Activity Trade Notes Outcomes You will… Explain the role of specialization in trade Calculate the difference between absolute advantage and comparative advantage

Socrative Student Short Response – List all the things that you are wearing and using right now and identify where each item was made. – Don’t forget to write your name!

Trade Standard 8

Activity Round 1- In your group, each person must create as many drawings as possible of cars and refrigerators. Every person must participate. You must alternate type of product with each drawing (1 st car, 2 nd fridge, 3 rd car, 4 th fridge). What was successful or unsuccessful about this process? Group 1Group 2Group 3Group 4Total of Product Cars Fridges Total for Group All products made=

Activity Round 2- Now each group will only make one product. 2 groups will make cars, and 2 groups will make fridges. What was successful or unsuccessful about this process? Which system is a more efficient way to produce products? Group 1Group 2Group 3Group 4 Cars Fridges Total Cars=Total Fridges=All products=

Specialization Each nation has certain resources and cannot produce everything it wants The result is specialization- individuals or businesses produce a narrow range of products Specialization leads to economic interdependence- a situation in which producers in one nation depend on others to provide goods and services they do not produce

What are exports? – The G/S that the U.S. sells to other countries What are imports? – The G/S that the U.S. buys from other countries

Question… 1.If the US is exporting apples, is the US selling apples or buying apples? A)Selling B)Buying 2. If the US is importing sugar, is the US selling sugar or buying sugar? A)Selling B)Buying

Why should businesses/nations specialize? It is more efficient (You can make more products in less time) It improves quality It encourages trade

Why can economic interdependence be good? It encourages specialization – Promotes efficiency – May improve quality – Access to more resources

Why can economic interdependence be bad? Bad things that happen in one country can affect others If a country imports too much it can lead to debt

Absolute advantage- the ability to produce a larger amount of a G/S than that of another trading nation Comparative advantage- the ability to produce a G/S at a lower opportunity cost than that of another trading nation

Bert and Betsy Household Chores (output per hour) Dishwashing (# of sink loads) Sweeping (# of trash loads) Betsy23 Bert11

Example- Computers and Toys The U.S. can produce 1000 computers or 5000 toys Mexico can produce 100 computers or 1000 toys U.S. has AA in BOTH computers and toys Which country has a CA in computers and which has a CA in toys? The country with CA will have the smallest opportunity cost!

OC= What is given up/what is gained Computer Production – US: Give up ____ toys/ Gain ___ computers = 5000 toys/1000 computers OC= 5 toys – Mexico Give up ____ toys/ Gain ___ computers = 1000 toys/100 computers= OC= 10 toys Toy Production – US: 1000 computers/5000 toys= OC =.2 computers – Mexico: 100 computers/1000 toys= OC =.1 computers The U.S. can produce 1000 computers or 5000 toys Mexico can produce 100 computers or 1000 toys

OC to produce computers in the U.S. is lower than Mexico- U.S. should specialize in computer production US OC= 5 Mexico OC= 10 OC to produce toys in Mexico is lower than the U.S.- Mexico should specialize in toys US OC=.2 Mexico OC=.1

Comparative Advantage Review Questions Which country has absolute advantage? A) USB) China What is the opportunity cost if the U.S. produces T.V.s? A) 10B)5C)0.2D) 20 What is the opportunity cost if Japan produces T.V.s? A) 1.2B)12C).833D) 1 Which country has comparative advantage in cars? A) USB) China What is the opportunity cost if the U.S. produces cellphones? A) 10B)5C)0.2D) 20 What is the opportunity cost if Japan produces cellphones? A) 1.2B)12C).833D) 1 Which country has comparative advantage in cellphones? A) USB) China The U.S. can produce 500 T.V.s or 2500 cellphones. Japan can produce 2500 T.V.s or 3000 cellphones. OC= What is given up/What is gained

Review Challenge Question The US buys TVs from Indonesia to sell in the United States. This is an example of A) Importing B) Exporting C) Specialization D) Comparative Advantage

Trade Barriers Offer some short-term protection to jobs and industries located within their borders Quotas- limits on the amount of a product that can be imported Tariffs- fees charge for goods brought into a country from another country

Balance of trade- the difference between the value of its imports and exports Balance of payments- a record of all the transactions that occurred between the individuals, businesses, and government units of one nation and those of the rest of the world

Challenge Questions Considering the balance of trade, what might cause a country to go into debt? A) Importing more goods than exporting B) Exporting more goods than importing C) Importing an amount equal to exports Why would a country institute barriers of trade? To keep money inside their own country What are the disadvantages of barriers of trade? It is not the most efficient means of trade. Countries may not utilize comparative advantage to it’s full extent.

Regional and World Trade Organizations European Union (EU) – An economic and political partnership between 27 European countries. Countries are economically interdependent because they all participate in a single market with a single form of currency, the euro. North American Free Trade Agreement (NAFTA) – Goal to eliminate barriers to trade between the US, Canada and Mexico. World Trade Organization (WTO) – deals with the global rules of trade between nations. Ensures that trade flows as smoothly, predictably and freely as possible.