The document discusses concepts related to international trade including absolute advantage, comparative advantage, and the benefits of trade. It provides examples comparing the production of sugar and bananas in Cuba and Honduras. Cuba has an absolute advantage in sugar production while Honduras has a comparative advantage. There are also discussions around developed vs emerging markets in production and examples of how comparative advantage applies to individual choices like cleaning houses.

1. Trade opener
What is good about living along the US/Mexico border?
Where was your shirt made? (Have your neighbor check)
http://www.flashworldmap.com/
Today:
Mankiw Chapter 3

2. Review of PPF’s

3. On the production possibilities frontier shown, which point
or points are NOT possible for this economy to produce?
a.A, B, C, D
b.E and F
c.E only
d.F only
On the production possibilities frontier shown, which
point or points are efficient?
a.A, B, C, D
b.B and C
c.E and F
d.F only

4. Comparative Advantage Activity

5. Absolute Advantage
• Total hours to finish jobs

6. Comparative Advantage

7. Specialization of labor
• Firms & countries
figure out more
efficient methods
of production
• Effect on concept
of trade?

8. Honduras
• 100 tons of
sugar/year
OR
• 100 tons of
bananas
• PPF

9. Cuba
• 600 tons of
sugar/year
OR
• 200 tons of
bananas

10. Cuba & Honduras
• Scarcity of farm land
• Who has absolute
advantage?
• Who has the
comparative
advantage of trade?
• Why is this better?
Cuba:
600 tons of sugar/year
OR
200 tons of bananas
Honduras:
100 tons of sugar/year
OR
100 tons of bananas

11. Developed vs. Emerging markets
Make a shirt in the USA:
Land
Labor
Capital
Make a shirt in Honduras:
Land
Labor
Capital

12. Developed vs. Emerging markets
Design smartphone in the USA:
Land
Labor
Capital
Design smartphone in Honduras:
Land
Labor
Capital

13. Another way of looking at
Comparative Advantage
• Should Jason Terry clean his
own house?

14. Another way of looking at
Comparative Advantage
• Should Lebron James clean
his house?

15. Another way of looking at
Comparative Advantage
• Walmart sells everything?
• Vs
• Specialty shops

16. Trade Ruler Game
http://www.nobelprize.org/educational/econ
omics/trade/game/ruler.html

17. GATE Economics Principle #1:
People Choose, based on preferences
• Your Choice:
• AP Econ Workbook Assignment
• Write 2-3 paragraph to Raul Grijalva explain the
concepts of absolute advantage, comparative
advantage and the benefits of further expansion of
NAFTA into South America
• 5pts extra if I watch you e-send it