Opportunity Cost ReviewTake 2 minutes: What does “there is

no such thing as a free lunch mean” to you?

Opportunity Cost ReviewOpportunity Cost: the next best

alternativeTrade-off: Any alternative that must

be given up

NMHS MenuNachosPeanut Butter

and Jelly Sandwich

Chicken FingersCaesar saladHam and cheese

sandwich

Rank your choice from 1-5

What was your opportunity cost?

What was your trade-off?

Opportunity Cost ReviewWhat does there is no such thing as

a free lunch mean to….1. Georgia?2. Other Competing States?

Notes –Comparative v. AbsoluteSSEIN1a- Define and compare

absolute and comparative advantageSSEIN1b-Explain that most trade

takes place b/c of comparative advantage

What is trade?Trade is the voluntary exchange of

goods and services.

Voluntary ExchangePeople only exchange goods and

services when it benefits them OR marginal benefits outweigh marginal costs

When costs are greater than the benefits people stop tradingBoth parties

gain!

Exports and ImportsExport: Goods that

a nation sells to other countries

Import: goods that a nation buys from other nations

Net Exports: (x-m)Exports-imports

Types of advantagesComparative Advantage

Absolute advantage

Producing a good because you have a lower opportunity cost.

You can produce a good with fewer resources than another country.

This means you can produce more goods and services more efficiently than another country.

Comparative AdvantageComparative advantage allows

countries to specialize. It is what we use to decide who

should produce products and who they should trade with.

Benefits of TradeBenefits

1. Increase in

competition

2. Increases the variety of goods

and services

3. Spreads knowledge

and education

4. Spreads new

technologies and

production methods

When countries specialize and trade it leads to an increase in the supply and variety of goods and services available

to consumers.

It is the difference between the exchange of exports and imports for a country

Exports - Imports= Balance of Trade

Balance of Trade

Favorable balance

Exports > Imports

Unfavorable Balance

Imports > Exports

Balance of Payments: the difference between money a country pays for exports receives for imports

In other words, it is a record of all transactions that occur because of trade.

Balance of Payments

Trade Deficit (negative trade balance): occurs when a country pays more for imports that it makes on exports

Trade Surplus (positive trade balance): occurs when a country earn more on exports than it pays for imports

Trade Values