Chapter3+JDEM



= // Trade- it happens everyday, everywhere: "hey ill give you a piece of tangerine for a bit of your sandwich" "hey wanna help me with econ? ill help you study for ap bio". Defined as an exchange of good or services, trade occurs when 2 different parties agree to swap. This creates a relationship of interdependence and mutual benefit. This chapter will focus on why both parties in a trade benefit, and how they come to a compromise/agreement that benefits both of them. // = = =

=__Main Ideas__=

What should each person produce? Should they trade?




__Specialization__
===Now, lets say that Ed and Dongju specialize in the production of Anchovies or Tangerines. Ed would specialize in the production of Tangerines and Dongju would specialize in Anchovies. Dongju will spend 6 hours a day producing meat and 2 hours a week producing potatoes. Ed will spend 8 hours to produce anchovies.===

__Results : Benefits from Trade__
As shown by this chapter, trade occurs BECAUSE it benefits both parties. If only one party benefits from trade, why would both parties agree to it? Trade is a means of producing outside the PPF curve, which means benefits for all involved. It is in this chapter that we can see the concepts of microeconomics (scarcity!!!) be applied to the real world- because everyone trades.



1. Without trade a. a country is better off because it will become self-sufficient. b. a country’s production possibilities frontier is also its consumption possibilities frontier. c. a country can still benefit from international specialization. d. more product variety is available in a country.



2. Given the information in the table, the opportunity cost of 1 lightsaber for Mr.Ski is a. 1/3 cookies. b. 1 cookies. c. 3 cookies. d. 4 cookies.

3. Given the information in the table, the opportunity cost of 1 lightsaber for Yoda is a. 1/4 cookies. b. 3/4 cookies. c. 1 cookies. d. 4/3 cookies.

4. Given the information in the table, if Mr.Ski and Yoda trade based on the principle of comparative advantage, Mr.Ski will export a. lightsabers and Yoda will export cookies. b. cookies and Yoda will export lightsabers. c. neither good and Yoda will export both goods. d. both goods and Yoda will export neither good.

5 Given the information in the table, Mr.Ski has an absolute advantage in a. Cookies and Yoda has an absolute advantage in lightsabers. b. Lightsabers and Yoda has an absolute advantage in cookies. c. neither good and Yoda has an absolute advantage in both goods. d. both goods and Yoda has an absolute advantage in neither good

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__**Glossary**__ imports: goods produced abroad and sold domestically. exports: goods produced domestically and sold abroad. absolute advantage: the comparison among producers of a good according to their productivity.

http://www.smjuhsd.k12.ca.us/~charmon/apnotesbyunit.htm http://www.suu.edu/faculty/tufte/06F_E6000/Notes/