Economics Unit F our

1. Economics Unit Four International Economics

2. Thursday, February 28th • Good morning/afternoon! • As you enter, please: • Sit in your old assigned seat (still working on new seating…hopefully tomorrow!) • Front Table – pick up a Unit 4 Summary (if you don’t already have one) and a Expedition Econ to complete • Also, pick up a Financial Literacy Post-Test and complete it the best you can – I’ll collect them shortly!

3. Class Updates First Block Courtney Ayodele Whit Eric Armalin Brianna Janecia Jennifer Kayla Daniel Second Block Nicolis Amanda Jeffrey Daryle Nell Martin Carlos Kelby Tiyana Wesley Makia Giselle Nejema Norman Fourth Block Sabrina Eliana Nia Chad Payton Andy Vanessa Sky Rawan Kendyl Carley • Time to Celebrate your Unit 3 Success!! • Here are our Unit 3 Hall of Famers!!

4. Class Updates • Unit 4 – International Economics • Monday, March 4th • Unit 4 Quizlet due • Unit 4 Formative/Quiz • Wednesday, March 6th • Unit 4 Summative (pushed back a day!) • Econ in the News due!

5. Class Updates Unit 5 – Personal Finance – estimated timing • Kick-off Thursday, March 7th • Wednesday, March 13th – Formative & Quizlet due • Friday, March 15th – Unit 5 Summative Friday – March 15th – Final due date for ANY make-up work! No Exceptions!

6. Class Updates Remaining Tutoring Opportunities • Today! • Mondays – March 4th and 11th • Thursdays – March 7th and 14th Econ Review Sessions • Wednesday, March 13th (early release day) – 12:30-3:30pm • Saturday, March 16th – 8:30 – 12:30pm

7. Economics is Everywhere!

8. Econ Big Ideas • Voluntary Exchange • Scarcity • Opportunity Cost

9. Unit Four – International Economics • SSEIN1 Explain why individuals, businesses, and governments trade goods and services. • Define and distinguish between absolute advantage and comparative advantage. • Explain that most trade takes place because of comparative advantage in the production of a good or service. • Define balance of trade, trade surplus, and trade deficit

10. Getting Started • Global Trade • Shift Happens – Original • Did You Know 2018

11. Let’s Predict – State Exports

12. Let’s Predict – State Exports

13. Let’s Predict – U.S. Trading Partners

14. Let’s Predict – U.S. Trading Partners

15. Absolutely Comparative Advantage Unit 4

16. As a class, brainstorm possible answers to the question: Do you have any lotion? Why do countries trade?

17. Countries trade because… • they cannot produce a product domestically. • to have a wider variety of goods available to consumers. • even if a they can produce a product, if another country specializes it that item, buying it from them may increase quality and decrease the price. • they wish to conserve limited resources. • other countries have an advantage. Specialize-a task assigned to one person or group that does it more efficiently

18. Anything you can do I can do better I can make more than you can Type of Advantage There are 2 types of advantage. • Absolute Advantage • Comparative Advantage Advantage-a condition or circumstance that puts one in a favorable position

19. Absolute Advantage Absolute Advantage- the concept that if 2 countries or businesses have the same amount of resources, one country can produce more than the other using fewer resources. Country A has and Absolute Advantage Country A can produce 1 million gallons of milk per year Country X can produce ½ million gallons of milk per year

20. Absolute Advantage Absolute Advantage occurs on an individual/firm level as well. Who has an absolute advantage in this example? Why might that bakery have an advantage? Chance It Home Bakerycan produce 150 dozen cookies per month Tucker’s Tasty Treats Bakerycan produce 500 dozen cookies per month

21. Is Absolute Advantage Everything? Does this mean that Chance It Home Bakery should go out of business because they cannot make as many cookies as Tucker’s Tasty Treats? The answer is no. Absolutely advantage is not the best way to determine who should produce. Can you think of a reason or an example of why Chance It bakery should continue making cookies? Let’s compare cost

22. Comparative Advantage Comparative Advantage- the concept that one country or business can produce a good or service at a lower opportunity cost than the other. Country X has and Comparative Advantage Country A can produce 1 million gallons of milk per year at $1.25 per gallon Country X can produce ½ million gallons of milk per year at $1 per gallon

23. Comparative Advantage Comparative Advantage also occurs on an individual/firm level. Fill in the blanks to give Chance It Home Bakery a comparative advantage? Given this scenario, Chance It should specialize in baking cookies because they have a lower opportunity cost. Chance It Home Bakerycan produce 150 dozen cookies per month for $____ per dozen Tucker’s Tasty Treats Bakerycan produce 500 dozen cookies per month for $____ per dozen

24. How to Calculate Comparative Advantage • Remember this formula We Give Up = Your Opportunity Cost If We Make

25. Example • Which country has an absolute advantage in producing sugar? • Which country has an absolute advantage in producing fertilizer? • Which country has a comparative advantage in producing sugar? • Which country has a comparative advantage in producing fertilizer?

26. Example • Which country has an absolute advantage in producing sugar? • USA • Which country has an absolute advantage in producing fertilizer? • USA

27. Example Remember We Give Up = Opportunity Cost (OC) Our Formula>> If We Make • Which country has a comparative advantage in producing sugar? • USA - What we give up (100) / If we make (80) = 1.25 Opportunity Cost • Nicaragua – What we give up (50) / If we make (70) = .71 Opportunity Cost • So Nicaragua has a lower opportunity cost of making sugar! • Therefore, they have a Comparative Advantage with sugar

28. Example Remember We Give Up = Opportunity Cost (OC) Our Formula>> If We Make • Which country has a comparative advantage in producing fertilizer? • USA - What we give up (80) / If we make (100) = 0.80 Opportunity Cost • Nicaragua – What we give up (70) / If we make (50) = 1.40 Opportunity Cost • So USA has a lower opportunity cost of making fertilizer! • Therefore, they have a Comparative Advantage with fertilizer

29. Let’s Practice! • Suppose that two of your friends, Karl and Kate want to make some extra money. • They decide to print designs on T-shirts and make birdhouses. • Kate can print six T-shirts OR make two birdhouses per hour. • Karl can print one T-shirt OR make one birdhouse per hour.

30. Let’s Practice! • Who has absolute advantage with: • T-Shirts? • Birdhouses? • Who has comparative advantage with: • T-Shirts? • Birdhouses? • Based on the Law of Comparative Advantage, who should produce: • T-Shirts? • Birdhouses?

31. The US can make more televisions than China so why don’t we make our own? According to The US Department of Labor, federal minimum wage is $7.25 per hour. In China, individual provinces set the minimum wage. There is no federal or national minimum wage. In one of the highest paying provinces Shenzhen, minimum wage in 1,300 Yuan per month which works out to approximately $1.29 per hour. If it takes a 6 hours of labor to build a television it would cost: $43.50 in labor if made in the US $7.74 in labor if made in China Because labor is so much cheaper in China, it makes sense that they would specialize in manufacturing products that required a great deal of low skilled labor, while the US specializes in producing goods and services that require a great deal of human and physical capital.

32. Friday, March 1st • Good morning/afternoon! • As you come in, please: • Sit in your (possibly new) seat! • Front Table – Pick up a Day 2 Expedition Econ and complete it using your Unit 4 Info Summary!

33. Class Updates • Unit 4 – International Economics • Monday, March 4th • Unit 4 Quizlet due • Unit 4 Formative/Quiz • Wednesday, March 6th • Unit 4 Summative (pushed back a day!) • Econ in the News due!

34. Class Updates Unit 5 – Personal Finance – estimated timing • Kick-off Thursday, March 7th • Wednesday, March 13th – Formative & Quizlet due • Friday, March 15th – Unit 5 Summative Friday – March 15th – Final due date for ANY make-up work! No Exceptions!

35. Class Updates Remaining Tutoring Opportunities • Mondays – March 4th and 11th • Thursdays – March 7th and 14th Econ Review Sessions • Wednesday, March 13th (early release day) – 12:30-3:30pm • Saturday, March 16th – 8:30 – 12:30pm

36. Strike a Balance When countries trade, it is important to keep a balance of goods exported and imported. The term balance of trade refers to the value of all goods and services exported minus the value of all goods and services imported. If a countries exports exceed its imports, then the country has a trade surplus. If the country imports more than it exports, then there is a trade deficit. Balance of Payments is how countries keep track of all monetary transactions in each sector(public and private) of the international market. It is the difference between the money a country pays out for imports and the money a country gets paid from other countries for exports. Does this leaf make me look tasty?

37. So…Let’s Think Like LeBron James! • Why do you think LeBron James decided to go straight into the NBA instead of going to college, play college hoops and get a degree like most NBA players? • Hmmm…so the opportunity cost of postponing the NBA for college was too high!

38. So…Should Lebron Mow His Own Grass? • Let’s assume that LeBron is a great basketball player and a great lawn mower. • However, LeBron has a young neighbor named Scotty who is willing to mow his lawn. • LeBron Choices: 1. Mow his lawn in two hours • 2. Make a Nike commercial in two hours for $10,000 • So, the opportunity cost of mowing his own yard is $10,000

39. Scotty…LeBron’s Neighbor • Neighbor Scotty’s choices: • Mow LeBron’s yard in 4 hours • Work at McDonalds for 4 hours and earn $8.00/hour Scotty’s opportunity cost for mowing LeBron’s yard is $32.

40. So Who Has the Absolute Advantage? • LeBron needs 2 hours to mow Scotty needs 4 hours • His yard to mow LeBron’s yard • Absolute Advantage – LeBron can do it in less time, so LeBron is better at mowing than Scotty.

41. So Who Has the Comparative Advantage? • LeBron’s Opportunity Cost Scotty’s Opportunity Cost • $10,000 $32 • Scotty has the comparative advantage because his opportunity cost is lower!

42. So would LeBron benefit from a trade? • While LeBron is better at mowing than Scotty (absolute advantage), his opportunity cost is much higher so Scotty has the comparative advantage! • Would LeBron benefit from a trade? • Yes! • As long as LeBron pays Scotty more than $32 to mow his yard then they both benefit from the trade.

43. So Everyone Benefits! • If we specialize at what we’re good at and trade with others for other things we want we all benefit. • This is why: • We generally don’t grow our own food • Factories often use assembly lines • Basketball or football players often specialize in one position as apposed to playing all of them • I teach economics and government and I DON’T teach chemistry or math! • What examples can you think of?

44. Specialization and TradeEveryone Benefits! • We already know specialization and voluntary exchange allow all parties to benefit in an economy • Well, the same works for regions and nations! • When countries specialize in certain goods, they are able to make more of that good and then benefit from trading with others • What a country produces depends on its resources – its natural resources such as land, water, metals and climate and its skilled and educated workers Increases the amount and variety of goods available to all nations; increases efficiency

45. Checkpoint Questions • Based on the table, which is true? • The US has an absolute advantage in corn; Russia has an absolute advantage in soybeans • The US has an absolute advantage in soybeans; Russia has an absolute advantage in corn • The US has an absolute advantage in both crops • Russia has an absolute advantage in both crops • In the year 2000, nation A sold exports worth $5 million and bought imports worth $8 million. Which of the following statements is definitely true about nation A in the year 2000? • It had a positive balance of payments • It had a negative balance of payments • It had a trade surplus • It had a trade deficit

46. Try these Questions 2. In the country of Balmoria, it takes 9 hours of labor to harvest a bushel of wheat and 6 hours of labor to build a wooden bookcase. In the nearby country of Dashmund, it takes 8 hours of labor to harvest a bushel of wheat and 7 hours to build a wooden bookcase. In terms of labor on these identical goods, which statement describes the situation accurately? • Dashmund has an absolute advantage in both wheat and bookcases. • Balmoria has an absolute advantage in both wheat and bookcases. • Dashmund has a comparative advantage in wheat harvesting. • Balmoria has a comparative advantage in wheat harvesting. • The table represents the number of bushels of wheat and rice that the United States and China can produce in one day.(numbers are in thousands). Which of these conclusions can be drawn from the data? • The United States has an absolute advantage in the production of wheat, and China has an absolute advantage in the production of rice. • The United States has an absolute advantage in the production of rice, and China has an absolute advantage in the production of wheat. • China has an absolute advantage in the production of both wheat and rice. • The United States has an absolute advantage in the production of both wheat and rice.

47. Try these Questions 3. Which of the following results when federal government expenditures are less than the federal government’s total receipts? • a trade surplus • a federal budget deficit • a negative balance of payments • a federal budget surplus

48. Check your answers • D (this is a question from the released EOCT) • C (this is a question from the EOCT Student Guide) • D (this is a question from the released EOCT)

49. Let’s Wrap It Up! • ACDC - Comparative Advantage

50. Let’s Wrap It Up! • Comparative Advantage Practice Sheet • Work with a partner to complete