1. Why Nations Trade

2. 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

3. Costa Rica coffee production

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

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

6. Percentage of oil reserves

8. Physical capital
Infrastructure – roads, bridges, machinery

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

10. 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.

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

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