Bellwork

1. Pay yourself if you have a token. Pay your Monday bills. Don’t forget to pay for your wedding if you got married.

2. Log in to the classroom. The password is ____________

3. Check on your stocks.4. Type of the definition of Opportunity Cost into

Socrative Student short response. Don’t forget to write your name!

Today’s Lesson

Agenda• Community Service

Reminder

• Review Quiz 7

• Specialization Activity

• Trade Notes

OutcomesYou will…•Explain the role of specialization in trade

•Calculate the difference between absolute advantage and comparative advantage

• Socrative Student Short Response– List all the things that you are wearing and using right

now and identify where each item was made.– Don’t forget to write your name!

Trade

Standard 8

Activity• Round 1- In your group, each person must create as many drawings as possible of

cars and refrigerators. Every person must participate. You must alternate type of product with each drawing (1st car, 2nd fridge, 3rd car, 4th fridge).

What was successful or unsuccessful about this process?

Group 1 Group 2 Group 3 Group 4 Total of Product

Cars

Fridges

Total for Group

All products made=

Activity• Round 2- Now each group will only make one product. 2 groups will make cars, and 2

groups will make fridges.

What was successful or unsuccessful about this process?

Which system is a more efficient way to produce products?

Group 1 Group 2 Group 3 Group 4

Cars

Fridges

Total Cars= Total Fridges= All products=

Specialization

• Each nation has certain resources and cannot produce everything it wants

• The result is specialization- individuals or businesses produce a narrow range of products

• Specialization leads to economic interdependence- a situation in which producers in one nation depend on others to provide goods and services they do not produce

• What are exports?– The G/S that the U.S. sells to other countries

• What are imports?– The G/S that the U.S. buys from other countries

Question…

1. If the US is exporting apples, is the US selling apples or buying apples?

A) SellingB) Buying

2. If the US is importing sugar, is the US selling sugar or buying sugar?

A) SellingB) Buying

Why should businesses/nations specialize?

• It is more efficient (You can make more products in less time)

• It improves quality• It encourages trade

Why can economic interdependence be good?

• It encourages specialization– Promotes efficiency– May improve quality– Access to more resources

Why can economic interdependence be bad?

• Bad things that happen in one country can affect others

• If a country imports too much it can lead to debt

• Absolute advantage- the ability to produce a larger amount of a G/S than that of another trading nation

• Comparative advantage- the ability to produce a G/S at a lower opportunity cost than that of another trading nation

Bert and Betsy

Household Chores (output per hour)

Dishwashing (# of sink loads)

Sweeping (# of trash loads)

Betsy 2 3

Bert 1 1

Example- Computers and Toys• The U.S. can produce 1000 computers

or 5000 toys• Mexico can produce 100 computers

or 1000 toys• U.S. has AA in BOTH computers and

toys• Which country has a CA in computers

and which has a CA in toys?• The country with CA will have the smallest opportunity cost!

OC= What is given up/what is gained

• Computer Production– US: Give up ____ toys/ Gain ___ computers =

5000 toys/1000 computersOC= 5 toys

– Mexico Give up ____ toys/ Gain ___ computers = 1000 toys/100 computers= OC= 10 toys

• Toy Production– US:

1000 computers/5000 toys= OC = .2 computers– Mexico:

100 computers/1000 toys= OC = .1 computers

The U.S. can produce 1000 computers or 5000 toysMexico can produce 100 computers or 1000 toys

• OC to produce computers in the U.S. is lower than Mexico- U.S. should specialize in computer production

US OC= 5Mexico OC= 10

• OC to produce toys in Mexico is lower than the U.S.- Mexico should specialize in toys

US OC= .2Mexico OC=.1

Comparative Advantage Review Questions

• Which country has absolute advantage?A) US B) China

• What is the opportunity cost if the U.S. produces T.V.s?A) 10 B)5 C)0.2 D) 20

• What is the opportunity cost if Japan produces T.V.s?A) 1.2 B)12 C).833 D) 1

• Which country has comparative advantage in cars? A) US B) China

• What is the opportunity cost if the U.S. produces cellphones?A) 10 B)5 C)0.2 D) 20

• What is the opportunity cost if Japan produces cellphones?A) 1.2 B)12 C).833 D) 1

• Which country has comparative advantage in cellphones? A) US B) China

The U.S. can produce 500 T.V.s or 2500 cellphones. Japan can produce 2500 T.V.s or 3000 cellphones.

OC= What is given up/What is gained

Review Challenge Question

• The US buys TVs from Indonesia to sell in the United States. This is an example ofA) ImportingB) ExportingC) SpecializationD) Comparative Advantage

Trade Barriers

• Offer some short-term protection to jobs and industries located within their borders

• Quotas- limits on the amount of a product that can be imported

• Tariffs- fees charge for goods brought into a country from another country

• Balance of trade- the difference between the value of its imports and exports

• Balance of payments- a record of all the transactions that occurred between the individuals, businesses, and government units of one nation and those of the rest of the world

Challenge Questions• Considering the balance of trade, what might

cause a country to go into debt?A) Importing more goods than exportingB) Exporting more goods than importingC) Importing an amount equal to exports

• Why would a country institute barriers of trade?•To keep money inside their own country

• What are the disadvantages of barriers of trade?•It is not the most efficient means of trade. Countries may not utilize comparative advantage to it’s full extent.

Regional and World Trade Organizations

• European Union (EU)– An economic and political partnership between 27 European countries. Countries are

economically interdependent because they all participate in a single market with a single form of currency, the euro.

• North American Free Trade Agreement (NAFTA)– Goal to eliminate barriers to trade between the US, Canada and Mexico.

• World Trade Organization (WTO)– deals with the global rules of trade between nations. Ensures that trade flows as

smoothly, predictably and freely as possible.