Chapter 17: Section 1

Kayla Marshall

Esmeralda Arreola

Monica Diaz

Priscilla De Los Santos

Good and services that if produces and then sell to other nations.

Goods and services that one country buys from other countries.

Absolute Advantage

Country’s a

bility to produce

more of a given product that can

another country.

Comparative Advantage

The ability to produce a product relatively more efficiently, or at a lower

opportunity cost.

The U.S. and International Trade

Beneficial to both U.S. and other nations:• Without trade, many products we have wouldn’t

be available.• Necessities are imports and trade is needed for

them.– Examples: Oil, clothing, and shoes.

• Raw materials are also needed especially in the U.S.– Examples: minerals & metals. Have to be imported.

• Also brings in money to help economy go round.

The Basis for Trade

Absolute Trade vs. Comparative Trade

The Gains from Trade

The concept of comparative advantage is based on the assumption that everyone will be better off producing the products they produce relatively fast and this applies to individuals, companies, states, regions, as well as to nations.

This explains the trade between Colombia and the United States.

The U.S. has excellent supplies of iron and coal. It also has the capital and the labor that are needed to produce tractors and farm machinery efficiently while Colombia in the other hand doesn't have much capital or skilled labor but it does have the land, labor, and climate to produce coffee. Because the U. S. has a comparative advantage in the production of farm machinery, it will trade these products for Colombian coffee.

Because Colombia has a comparative advantage in the production of coffee, it will export coffee and import farm equipment.