CHAPTER 3 - CHAPTER3 Microeconomics Premium PowerPoint...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Interdependence and the Gains from Trade Microeconomics Premium PowerPoint Slides by Ron Cronovich In this chapter, look for the answers to these questions: Why do people – and nations – choose to be economically interdependent? How can trade make everyone better off? What is absolute advantage? What is comparative advantage? How are these concepts similar? How are they different? 1 Interdependence Every day you rely on many people from around the world, most of whom you’ve never met, to provide you with the goods and services you enjoy. 1 Interdependence One of the Ten Principles from Chapter 1: Trade can make everyone better off. We now learn why people – and nations – choose to be interdependent, and how they can gain from trade. INTERDEPENDENCE AND THE GAINS FROM TRADE 3 Our Example Twocountries: theU.S.andJapan Two goods: computers and wheat One resource: labor, measured in hours We will look at how much of both goods each country produces and consumes if the country chooses to be self-sufficient if it trades with the other country INTERDEPENDENCE AND THE GAINS FROM TRADE 4 Production Possibilities in the U.S. The U.S. has 50,000 hours of labor available for production, per month. Producing one computer requires 100 hours of labor. Producing one ton of wheat requires 10 hours of labor. INTERDEPENDENCE AND THE GAINS FROM TRADE 5 2 The U.S. PPF Computers 100 200 300 400 500 INTERDEPENDENCE AND THE GAINS FROM TRADE 6 Wheat (tons) 5,000 4,000 3,000 2,000 1,000 0 The U.S. Without Trade Suppose the U.S. uses half its labor to produce each of the two goods. Then it will produce and consume
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 5

CHAPTER 3 - CHAPTER3 Microeconomics Premium PowerPoint...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online