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

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.

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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

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