Economics Chapter 4: Trade
Discourages Specialization
A lack of good transportation system
Comparative Advantage
Ability to perform a task at a lower opportunity cost than someone else
Factors contributing to a nation's comparative advantage
Climate, education, wage levels and technology
Division of Labor
Dividing up task in order for individuals to become experts
Mutual Gain
Essential for trade to work effectively
Self-sufficient Society vs. Specialized Society
Experiences limited modernized materials and is less productive than a specialized society
Mass Production
Large scale manufacturing
One way trade makes people more wealthy?
Lowers the cost of good
How does trade affect the cost of goods?
Lowers the cost of good by using mass production
Benefits of Trade
More choice, better quality, moves products to those who want it
True of the American economy and trade
Most Americans experience benefits from global trade.
Outcome of Increasing International Trade
Old jobs that were once secure may no longer exist
What is the relationship between specialization and trade?
People become more economically interdependent.
Money
Primary means used today as the medium of exchange
Why did the Founding Fathers set up trade barriers to limit interstate trade?
Promote Self-Sufficiency
How to produce more with the same input?
Specialization
Disadvantage of Trade
Takes business away from local producers
Trade Barriers
Tariffs and other ways to limit interstate commerce (trade)
Economic Interdependence
The dependence on others for goods and services
Wealth
The value of all things that an individual owns
How does trade increase the variety and quantity of goods available?
Trade makes nations want to compete with each other.
How does trade increase the value of goods?
Trade moves goods to people who value them more
Voluntary Exchange
Willingness to give up something to get what you want
Specialization
Workers becoming highly skilled at a specific task
Absolute Advantage
the condition that exists when someone can produce a good or service using fewer resources than someone else