Advanced Economics Week #6

Spring 2012

Advanced Economics 4/30/12http://mrmilewski.com

• OBJECTIVE: Begin examination of Globalization. • I. Journal#17pt.A

-Watch the following:-Renewed Recessions Rock Europe Amid Slower Growth

in U.S.• II. Return of Chapter#10&13 Test• III. Journal#17pt.B

-notes on globalization• Notice: Homework Due 5/14/12: Ch#18sec(1-4)• Notice: 22 Days until the Senior’s Last Day!

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

Advanced Economics 5/1/12http://mrmilewski.com

• OBJECTIVE: Continue examination of Globalization.

• I. Administrative Stuff-attendance

• II. Film: Commanding Heights Episode#2-questions on film about globalization

• Notice: Homework Due 5/14/12: Ch#18sec(1-4)• Notice: 21 Days until the Senior’s Last Day!

Advanced Economics 5/2/12http://mrmilewski.com

• OBJECTIVE: Begin examination of Globalization. • I. Administrative Stuff

-Attendance• II. Journal#18: Commanding Heights episode#2

-notes on the Commanding Heights• Notice: Homework Due 5/14/12: Ch#18sec(1-4)• Notice: 20 Days until the Senior’s Last Day!

Advanced Economics 5/3/12http://mrmilewski.com

• OBJECTIVE: Examine the comparative economic spectrum. • I. Journal#19pt.A

-Watch the following:-After the Fall: People, Banks 'Still Cautious' on Credit

, Debts• II. Journal#19pt.B

-Read “Karl Marx” p. 500 & Political spectrum on the board• Notice: Homework Due 5/14/12: Ch#18sec(1-4)• Notice: 19 Days until the Senior’s Last Day!

Advanced Economics 5/4/12http://mrmilewski.com

• OBJECTIVE: Examine the comparative economic spectrum.

• I. Journal#20pt.A-Watch the following:-Troubling New Signs Plague European, U.S. Economies

• II. Journal#20pt.B-notes on comparative economic systems

• Notice: Homework Due 5/14/12: Ch#18sec(1-4)• Notice: 18 Days until the Senior’s Last Day!

Types of Economic Systems