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Ch. 4 Economics
Economics
| Question | Answer |
|---|---|
| Life 200 years ago | self-sufficiency |
| Societies that emphasize self-sufficiency are ___ and have a ___ standard of living than those that rely on specialization and trade. Why? If not specialized then cant trade for anything to make life better. specialize then make more money on things you d | less productive, standard of living |
| Specialization | Individual workers become highly skilled at a specific task |
| Division of Labor | The allocation of separate tasks to different people |
| Secpialization Improves productivity | Workes become more productive when they specialize in one step on the manufacturing process. an economy can produce more with the same inputs of land, labor, and capital when each person or business specializes in a skill or task. |
| Productivity increases | More products and services become available to more people- living standards rise for society. US has thousands of job titles |
| Specialization Encourages Trade | When people specialize, they no longer produce everything for themselves. Trade develops |
| Voluntary exchange | Both parties give up something in order to get something else they want. |
| Barter | Direct exchange of one good or service for another- coincidence of wants- when you have something I want and I have something you want. |
| Money | A medium of exchange that can be traded for goods or services or used to pay debts. Useful only when its value is generally accepted throughout society. |
| Economic interdependence | when we specialize and trade, we depend on other people or countries to produce many of the goods and services we want. |
| Trade Barriers | □ Include tariffs and other measures to limit interstate trade, were designed to protect local industry and promote self-sufficiency. Prompted conflicts because states tried to set their own limits. |
| Commerce Clause | Congress shall have Power to regulate Commerce with foreign Nations, and among the several States. (Gives them the power to regulate what the price will be) |
| Commerce Clause empowers the national government to what? | Promote trade and economic interdependence among the states because of this the federal Government maintains an interstate highway system and regulates navigation on interstate rivers and lakes. Contribute to a large and prosperous national economy. |
| Castaways on Desert Island | l Castaways on Desert Island □ Alex Selkirk and Pirate Jack □ Gathering turnips and digging clams □ Absolute Advantage- see page 62 chart- he can do everything better and faster □ Pirate Jack goes off by himself |
| Absolute advantage | The condition that exists when someone can produce a good or service using fewer resources than someone else. |
| Economic Interdependence | The development of skills or knowledge in one aspect of a job or field of interest. People who specialize of interest. People who specialize become expert in a particular activity. |
| Comparative Advantage | The ability to perform a task at a lower opportunity cost than someone else is able to perform that task. |
| English Economics | David Ricardo, who is 1817, developed the theory of comparative advantage. |
| Benefits of Comparative Advantage | if the opportunity cost is less than another producer's opportunity cost. □ Placed a tax on imported gain in order to raise its price and protect English grain growers, which couldn't compete with cheaper foreign grain. □ Helped the farmers and wealth |
| As a producer how do they have an absolute advantage? | if the time and labor required for you to produce something that is less than it is for another producer. |
| What did Ricardo say about allowing cheaper grain in England | Force the English to cut back production and concentrate their resources on manufacturing which was increasing their resources on manufacturing which was increasing where their advantage lay-specialized in goods in which they had a comparative advantage a |
| Calculating Opportunity costs of going it alone | Production Possibilities Frontier (PPFs) Shows how much of tow products or services a person or an economy an produce in a given amount. |
| Specialization based on comparative advantage benefits both trading partners | □ Ricardo says that Selkirk and Pirate Jack should each specialize in the activity in which he has a comparative advantage. Selkirk dig for clams and Pirate Jack should gather turnips. Then trade with each other. This would work to their benefit. |
| Comparative advantage | The condition that exists when someone can produce a good or service using fewer resources than someone else. |
| Comparative advantage guides who produces what: | Florida oranges, idaho potatoes- societyt usually benefits |
| Factors that affect comparative advantage may seem obvious | Climate and natural resources Nevada- gold Saudi arabia- oil Canada- timber |
| Factors determining comparative advantage | Geography Education Wage level Technology difference |
| Comparative Advantage to Nation | □ Less developed nations tend to have relatively unskilled low- wage workforces. Such countries have a comparative advantage in the production of assembly line goods that do not require highly skilled labor. □ Countries that seem to have it all can actu |
| Comparative advantages stand to benefit all trade partners. | Countries that seem to have it all can gain by specializing in what they do best and trading with other countries |
| U.S. has a comparative advantage in the development of advanced technologies. | READ |
| Less developed mations tend to have relatively unskilled low-wage workforces. such countries have a comparative advantage in the production of _________ that do not require _____________. | assembly line goods, highly skilled labor |
| Comparative Advantage in countries | -Countries that seem to have it all can actually gain more by specializing in what they do best and trade with other countries. -Countries with no absolute advantage come out ahead by finding what they can produce at a lower opportunity cost than others. |
| Comparative advantage stands to benefit all trading partners. | READ |
| How Does Trade make us wealthier? | Trade raises our standard of living and makes us wealthier - it puts goods in the hands of those who value them -it increases the quantity and variety of goods -it lowers the cost of goods |
| Trade moves goods to people who value them | Second hand items Trade for things we value, our wealth increases. Economist define wealth as the total value of all the things a person owns. |
| Second Hand Item | Moves goods from people who value them less to people who value them more |
| Trade increases the quantity and variety of goods available | Choice we have as consumers |
| Trade lowers the costs of goods | SEE CHART -opens markets to less costly goods from other places -lower the cost of goods by expanding markets for products -mass production: large scale manufacturing |
| Trade Creates More winners than losers | READ ITALICS |
Created by:
lilgraciemarie