Post on 25-Feb-2016
description
TRADE IN A GLOBAL ECONOMY
BENEFITS ISSUES• Specialization
• Increased world output due to specialization
• Increased standard of living around the
world
• Economic interdependence
• Tariffs• Human Rights in the
workplace ( Ex. Sweatshops)
• Fair Trade
INTERNATIONAL TRADE
ABSOLUTE ADVANTAGE:
http://education-portal.com/academy/lesson/absolute-advantage-in-trade-definition-and-examples.html
Absolute Advantage
Comparative Advantage
• The ability of one trading nation to make
a product more efficiently than
another trading nation
• The idea that a nation will specialize in what it can produce at a lower opportunity cost than
any other nation
Absolute vs. Comparative Advantage in Trade
Output in Units Per DayLawn Mowing Laundry
Tony 2 12Jen 5 10
Sample Question:
A. How many loads of laundry can Tony do in a week? ________
How many loads of laundry can Jen do in a week? ______
B. How many lawns can Tony mow in a week? ________
How many lawns can Jen mow in a week? ________
C. Who has the Absolute Advantage in lawn mowing?
________________
D. Who has the Absolute Advantage in laundry?
________________
8470
1435
Jen
Tony
Opportunity CostMow lawns Laundry
TonyJen
*Hint: You calculate opportunity cost by calculating what you are giving up when you make only one of each item. Ex.) If Jen mows only 1 lawn, how many loads of laundry is she giving up? Put your answer in the table next to Jen under laundry.
Output in Units Per Day
Mow lawns LaundryTony 2 12Jen 5 10
62
1/61/2
Who has the Comparative Advantage in lawn mowing? __________________Who has the Comparative Advantage in laundry? __________________Applying the Law of Comparative Advantage, who should mow lawns? ___________________
Opportunity CostMow lawns Laundry
TonyJen
62
1/61/2
Jen
Tony
Jen
Output in units per hourCARS TV’s
CHINA 200 100JAPAN 100 500
How many cars can China make in a day? ________
How many tv’s can Japan make in a day? ________
Who has the Absolute Advantage in car production?
________________
Who has the Absolute Advantage in tv production?
________________
1600400
0CHIN
AJAPAN
Output in units per hourCARS TV’s
CHINA 200 100JAPAN 100 500
Opportunity CostCARS TV’s
CHINAJAPAN
1/25
21/5
Opportunity CostCARS TV’s
CHINAJAPAN
1/25
21/5
Who has the Comparative Advantage in Car production? __________________Who has the Comparative Advantage in tv production? __________________Applying the Law of Comparative Advantage, who should produce Cars? ___________________CHIN
A
JAPAN
CHINA
Output in Units Per Day
Cakes Cookies (dozens)
Robin 10 20Jake 15 15
How many Cakes can Robin make in a week? ________
How many dozens of Cookies can Jake make? ________
Who has the Absolute Advantage in Cake production?
________________
Who has the Absolute Advantage in Cookie production?
________________
70
105
Jake
Robin
Output in Units Per Day
Cakes Cookies (dozens)
Robin 10 20Jake 15 15
Opportunity Cost Cakes Cookies
(dozens)Robin Jake
*Hint: You calculate opportunity cost by calculating what you are giving up when you make only one of each item. Ex.) If Robin makes only 1 cake, how many dozens of cookies is she giving up? Put your answer in the table next to Robin under cakes.
2
11/21
Opportunity Cost Cakes Cookies
(dozens)Robin Jake
Who has the Comparative Advantage in Cake production? __________________Who has the Comparative Advantage in Cookie production? __________________Applying the Law of Comparative Advantage, who should produce Cakes? ___________________
21
1/21
JakeRobi
nJake
TRADE AGREEMENT
HOW DO THEY WORK?
EUROPEAN UNION
Bound both economically & politically (member surrender some sovereignty; monetary union (euro), common foreign policy
NAFTA Largest free-trade zone in the world; eliminated tariffs; phase-out of all trade barriers; increased protection for intellectual property & environmental protections
OPEC Group of producers that regulate the production, pricing, and marketing of oil
WTO Help negotiate trade agreements; resolve disputes; monitor trading policies; provide support for developing countries