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
• After Trade
• Alpha produced
-20 lbs coffee
-4 lbs cashews
• Beta produced
-5 lbs coffee
-1 lbs cashews
• Totals
-25 lbs coffee
-5 lbs cashews
• 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 Trade
Ch#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!