Today’s Schedule – 12/6 Classroom Research PPT: Why Trade? Rdg: Trade HW: – Read 18.2

Classroom Research Look at items around the room - where were they made? – Find at least two (2) items and tell me: What they are Where were they made – Consider food, clothing, decorative items, etc.

Think About What types of goods are produced here in the U.S.? So why do we trade with other countries?

Resources Natural Resources – Varies from region to region Coffee, Avocados, Sugar Human Capital – Certain goods require various amounts of education for the humans producing those goods

Specialization Each country is better at producing one good over another – Better resources than another – More economical to produce one good and do it well than many goods produced so so – Trade for other goods

Absolute Advantages The ability to produce more of a given product using a given amount of resources Example – Country A can produce 20 barrels of rice and 40 pounds of coffee a day – Country B can produce 10 barrels of rice and 15 pounds of coffee a day – Country A has an absolute advantage over Country B

Comparative Advantage The ability to produce good most efficiently given all other possible goods to produce Law of Comparative of Advantage – A country is better off when it produces G & S for which it is has a comparative advantage

Comparative Advantage Country A produces 20 barrels of rice or 10 pounds of coffee in one day Country B produces 15 barrels of rice or 20 pounds of coffee in a day Country A has a comparative advantage in rice Country B has a comparative advantage in coffee

Comparative Advantage Country A is better off producing/exporting rice and importing coffee Country B is better off producing/exporting coffee and producing rice Export- A G that is sent to another country for sale Import- A G that is brought in from another country for sale

Trade and Jobs Force people to specialize in the knowledge of the G that their country exports