Module 4 Jan 2015.  Trade – people divide tasks among themselves and each person provides a good or service that others want in return for different.

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Presentation transcript:

Module 4 Jan 2015

 Trade – people divide tasks among themselves and each person provides a good or service that others want in return for different goods and services.  Gains from Trade – by dividing tasks and trading, people can get more than they would if they relied solely on themselves.  Specialization – different people engage in different tasks

 White board activity  Susie can make 24 cakes in a day OR 16 pies.  Keith can make 20 cakes in a day OR 14 pies.  Create a chart showing opportunity cost:  SusieKeith  One cake _____ pie____cake  One pie _____pie____cake

 SusieKeith  One cake 2/3 pie7/10 pie  One pie 3/2cake10/7cake  Yes, I reduced my fractions – you need to do that, also.  On your white boards, please show me the PPC for each person, Susie on the left and Keith on the right (using their original numbers)

 An individual has a comparative advantage in producing something if the OC of that production is lower for that individual than for others.  Which is less 2/3 or 7/10?  Which is less 3/2 or 10/7?  Now, who should make cakes and who should make pies?

 Being able to produce more output with a given amount of input than others can with the same resources.  So even though Susie can make more cakes and pies, everybody is better off when Keith makes the pies.

 Read Modules 1-4  Answer the following questions on pages : 1, 4, 5, 8, 12