Economics 11/21/11 http://mrmilewski.com

• OBJECTIVE: Examine the growth in international trade at the end of the 20th century. MCSS E-2.1.9

• I. Administrative Stuff-attendance

• II. Commanding Heights Episode#3-Answer questions on the film

• NOTICE: Chapter#15 Test Tomorrow!

Economics 11/22/11 http://mrmilewski.com

• OBJECTIVE: Demonstration of Chapter#15 and begin examination of International Trade. MCSS E-3.2.1

• I. Administrative Stuff-attendance & distribution of test

• II. Chapter#15 Test• III. Journal #41 pt.A

-Read “The Global Economy” p.453-Answer questions (1-2) p.453

• IV. Journal#41 pt.B -notes on trade

The Days Ahead• Today 11/22: Ch#15 Test & Journal#41• Tomorrow 11/23: Journal#42• Thursday: 11/24: Thanksgiving• Friday: 11/25: Black Friday• Monday 11/28: Journals 31-42 Due!• Tuesday 11/29: Review for Final Exam• Wednesday 11/30: Finals Hours 1,2,3• Thursday12/1: Finals 4&5• Friday 12/2: No School.

What is international trade?

• When goods and services are bought and sold between nations.

• Import – something made in another nation and sold here.

• Export – something made here and sold in another nation.

Why do nations trade?• Not all nations can produce what they need at

home.• For example, Japan is an industrial nation, yet they

have no domestic sources of oil. They import it.• The United States uses more energy than we

produce, so we have to import oil. We produce more food than we can consume. We export crops like wheat and corn, but we also import food like bananas and coffee because the climate in the United States isn’t right for those products.

Why trade?• Specialization – assignment of tasks so that each

worker performs fewer tasks more frequently• i.e. – Detroit specializes in cars, Florida in

oranges, Texas in cattle• Exports – what a nation specializes in.• Individuals engage in trade because they believe

what they gain is equivalent in value to what they give up.

Advantage

• Absolute advantage – when one country can produce more of a product than another country

• Comparative advantage – the ability of a nation to produce a product at a relatively lower opportunity cost than another nation.

Advantage• Opportunity cost – cost of the next best

alternative use of money, time, or resources when one choice is made over another

Alpha & Beta

• Country A• PPF –

-40 lbs of coffee

-8 lbs of cashew nuts• Opportunity cost

-5 coffee for 1 cashew

• Country B• PPF-

-6 lbs coffee

-6 lbs cashew nuts• Opportunity cost

-1 coffee for 1 cashew

Before & After Trade• Before Trade• Alpha produced

-20 lbs coffee-4 lbs cashews

• Beta produced-5 lbs coffee-1 lbs cashews

• Totals-25 lbs coffee-5 lbs cashews

• After Trade• Alpha specializes in coffee

-40 lbs coffee-0 lbs cashews

• Beta specializes in cashews-0 lbs coffee-6 lbs cashews

• Totals-40 lbs coffee-6 lbs cashews

The Gains of TradeCh#17 sec#1 p. 469

Figure 17.2a Figure 17.2b

Economics 11/23/11 http://mrmilewski.com

• OBJECTIVE: Examine barriers to international trade. MCSS E-3.2.2

• I. Journal #42 pt.A-Read “The Global Economy” p.476

-Answer questions (1-3) p.476

• II. Quiz #23• III. Return of Chapter#15 Test• IV. Journal#42 pt.B

-notes on barriers to international trade

• NOTICE: Journals 31-42 Due Monday! • NOTICE: Final Exam Thursday Dec 1st!

The Days Ahead• Today 11/23: Journal#42

• Thursday: 11/24: Thanksgiving

• Friday: 11/25: Black Friday

• Monday 11/28: Journals 31-42 Due!

• Tuesday 11/29: Review for Final Exam

• Wednesday 11/30: Finals Hours 1,2,3

• Thursday12/1: Finals 4&5

• Friday 12/2: No School.

The ways to stop trade

• Tariff – tax placed on imports to increase their cost on the domestic market place

• Protective tariff – tariff high enough to protect less-efficient domestic industries

• Revenue tariff – a tariff high enough to generate income for the government without actually prohibiting imports

Other barriers to trade• Quotas – a limit on the number of goods entering

a country. This keeps supply low and prices high for domestic producers

• Dumping – selling products abroad at less than it cost to produce them at home

• Health inspections – used to curb foreign agricultural products

• Import licenses – high fee keeps the number of importers low

Arguments for Protection• Protecting domestic jobs – trade means those in

jobs where we don’t have a comparative advantage become unemployed. Unemployment negatively impacts our economy.

• National defense – a nation could become so dependent on other countries that during war time they will be unable to produce the materials necessary to win the war

• Promoting Infant Industries – new/emerging industries need protection from foreign competition

Growth of Free trade• Keep money at home – money should

stay in the domestic economy according to protectionists. Free trades argue that this money will flow back under balance of payments

NAFTA

• North American Free Trade Agreement – reduced tariffs between the U.S., Canada, and Mexico

Economics 11/28/11 http://mrmilewski.com

• OBJECTIVE: Review for Final Exam

• I. Administrative Stuff-attendance

-Journals 31-42 Due!

• II. Independent Review for Final Exam

• NOTICE: Final Exam Thursday Dec 1st!

Economics 11/29/11 http://mrmilewski.com

• OBJECTIVE: Review for Final Exam & Economics Post Test

• I. Administrative Stuff-attendance & distribution of post test

• II. Review for Final Exam

• NOTICE: Final Exam Thursday Dec 1st!