Chater 3 why people trade

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Chater 3 why people trade

  1. 1. WHY PEOPLE TRADE?<br />Anna’s Economics in Action Class<br />
  2. 2. Anna stop by the local gas station and puts $40 worth of gas in her car. Anna then pays the station owner $40.<br />
  3. 3. Opinion 1 Both gained and lost <br /> Gasoline<br />Gain:<br />Lose:<br />$40<br />$40<br />Gain:<br />Lose:<br /> Gasoline<br />
  4. 4. Opinion 2 Both parties overall gained<br />BOTH<br />BETTER OFF<br /><<br />><br />
  5. 5. Class Objectives<br />Students will<br />1. Participate in a trading activity and describe the incentives that encourage trade.<br />2. Explain the outcomes of voluntary trade.<br />3. Explain why there aren't any direct losers from voluntary trade.<br />4. Explain why both parties benefit from the trade.<br />
  6. 6. Game Activity Why people trade?<br />Round 1<br />Voluntary Trade <br /> -with barriers-<br />
  7. 7. Game Activity Why people trade?<br />Round 2<br />Free trade <br /> -with no Restrictions-<br />
  8. 8. Summary<br />People place different marginal values on items. People tend to give up items they value less than the item they are getting in exchange. Because “people response to incentives.” <br /> If you made a trade at least one times during the activity that mean you ended up with an item you valued more than the one you had at the beginning.<br />
  9. 9. Related Principles<br />#3. Rational people think at the margin.<br />#4. People respond to incentives. <br />#5. Trade can make everyone better off.<br />
  10. 10. Definitions<br />Voluntary Trade: You act on your free will <br />=> Both gains, both better off.<br />Utility: your happiness or satisfaction of an item.<br />Barriers to trade: <br /> in the past- geographical limitation<br /> in the present- restriction by Government(enact by law)<br />Free Trade: the trade of Goods and Services between countries under no Government imposed restriction.<br />Benefits of trade: people better off.<br />=> trade make you more happy.<br />

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