Wonderful Wednesday, August 29 · Wonderful Wednesday, August 29 Warm up: Create a separate index...

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Terrific Tuesday, August 28Wonderful Wednesday, August 29Warm up: Create a separate index card for each of the following terms: (1) production possibilities curve/frontier (include definition, assumptions and sample graph); (2) factors of production; (3) normative and positive statements.● Learning target: I can describe what factors can cause

economic growth as reflected in an outward shift of a PPC. I can explain the benefits of specialization and gains from trade.

● Unit 1a summative test on Thurs, Sept 6 and Friday, Sept 7.○ Study guide posted on Verge and on

https://sbrownsocialstudies.weebly.com/class-notes--ap.html

Let’s take a little quizzie poo . . .

PPC PracticeDraw a PPC showing changes for each of the following:

Pizza and Computers (3) 1. New computer making technology

2. Decrease in the demand for pizza 3. Mad cow disease kills 85% of cows

Consumer goods and Capital Goods (4) 4. Destruction of power plants leads to severe electricity

shortage 5. Faster computer hardware 6. Many workers unemployed 7. Significant increases in education

3Copyright ACDC Leadership 2018

New computer making technology

Pizzas

Question #1

A shift only for computers.

Copyright ACDC Leadership 2018

Decrease in the demand for pizzaC

Pizzas

Question #2

The curve doesn’t shift!A change in demand

doesn’t shift the curve.

Mad cow disease kills 85% of cowsC

Pizzas

Question #3

A shift inward only for Pizza.

Destruction of power plantsC

Consumer Goods (Butter)

Question #4

Decrease in resources = decrease production possibilities for both.

Faster computer hardwareC

Question #5

Quality of a resource improves = shifting the

curve outward.

Many workers unemployedC

Question #6

The curve doesn’t shift!Unemployment is just a point inside the curve.

Significant increases in educationC

Question #7

The quality of labor is improved. Curve shifts

outward.

Specialization and TradeWhy do people trade?

Why do people trade?1. Assume people didn’t trade. What things would you have to go

without? ○ Everything you don’t produce yourself!○ (Clothes, car, cell phone, bananas, healthcare, etc.)The Point: Everyone specializes in the production of goods and services and trades with others.

2. What would life be like if people in cities couldn’t trade with people in other cities or people in states couldn’t trade with people in other states?○ Limiting trade would reduce people’s choices and make people

worse off. The Point: More access to trade means more choices and a higher standard of living. 12Copyright

ACDC Leadership 2018

What could you live without??If we did not import these goods, what would happen?

http://www.worldstopexports.com/united-states-top-10-imports/Copyright ACDC Leadership 2018

Specialization ActivityRound 1: Draw as many houses as you can with your right hand in 40 seconds.Round 2: Draw as many cars as you can with your left hand in 40 seconds.

What is your opportunity cost for each house? What is your opportunity cost for each car?

How might right-handed students and left-handed students specialize and trade?

Absolute and Comparative Advantage

Per Unit Opportunity Cost ReviewAssume it costs you $50 to produce 5 t-shirts. What is your PER UNIT

cost for each shirt? $10 per shirt

Now, take money out of the equation. Instead of producing 5 shirts you could have made 10 hats.

1. What is your PER UNIT OPPORTUNITY COST for each shirt in terms of hats given up?

1 shirt costs 2 hats 2. What is your PER UNIT OPPORTUNITY COST for each hat in

terms of shirts given up? 1 hat costs 1/2 shirt

= Opportunity CostUnits Gained

Per Unit Opportunity Cost

Per Unit Opportunity Cost ReviewRonald McDonald can produce 20 pizzas or 200 burgers Little Caesar can

produce 100 pizzas or 200 burgers. In practice set.1. What is Ronald’s opportunity cost for one pizza in terms of burgers given

up?2. What is Ronald’s opportunity cost for one burger in terms of pizza given

up?3. What is Caesar’s opportunity cost for one pizza in terms of burgers given

up?4. What is Caesar’s opportunity cost for one burger in terms of pizza given

Ronald has a COMPARATIVE ADVANTAGE in the production of burgers.Caesar has a COMPARATIVE ADVANTAGE in the production of pizza.

1 pizza cost 10 burgers

1 burger costs 1/10 pizza

1 pizza costs 2 burgers

1 burger costs 1/2 pizza

Absolute and Comparative AdvantageAbsolute Advantage

•The producer that can produce the most output OR requires the least amount of inputs (resources).

•Ex: Caesar has an absolute advantage in pizzas because he can produce 100 and Ronald can only make 20.

Comparative Advantage•The producer with the lowest opportunity cost.•Ex: Ronald has a comparative advantage in burgers because he has a lowest PER UNIT opportunity cost.

Thorough Thursday, August 30Freelance Friday, August 31● Talk with your neighbor about the following; write down what

you are unsure of.● Explain how you would use the concept of opportunity cost in

everyday life. ● Differentiate between increasing and constant opportunity cost PPCs.● Explain why the Law of Increasing Opportunity Cost occurs. ● Explain how you calculate PER UNIT opportunity cost.● Explain difference btw productive and allocative efficiency the PPC.● Identify the 3 Shifters of the PPC.● Give 2 SPECIFIC scenarios that would shift a PPC outward (Use

Pizza and Robots).● List 10 types of Soda.

Thorough Thursday, August 30Freelance Friday, August 31● Learning target: I can explain the benefits of specialization and

gains from trade. I can determine absolute and comparative advantage and I can calculate terms of trade.

● Unit 1a summative test next Thursday, September 6 and Friday, September 7.○ Study guide posted on Verge and on

https://sbrownsocialstudies.weebly.com/class-notes--ap.html

Absolute and Comparative AdvantageCountries should specialize in the good that is “cheaper” for them to produce (the one for which they have a comparative advantage) and trade for other goods and services.International trade is based on comparative advantage.

Benefits of Specialization and

45403530252015

30252015 10

5 10 15 20 25 30 5 10 15 20Wheat (tons) Wheat (tons)

USABrazil

Wheat Sugar30 3010 20

(1W costs 1S) (1S costs 1W)(1W costs 2S) (1S costs 1/2W)

Which country has a comparative advantage in wheat?

USABrazil

Wheat Sugar30 3010 20

(1W costs 1S) (1S costs 1W)(1W costs 2S) (1S costs 1/2W)

Which country has a comparative advantage in wheat?

1. Which country should EXPORT Sugar?2. Which country should EXPORT Wheat? 3. Which country should IMPORT Wheat?

See practice Qs:U.S./BrazilJapan/Canada

2008 Audit ExamCopyright ACDC Leadership 2018

See practice Qs/See the cow . . .

Output Questions:OOO=

Output: Other goes Over

See practice Qs

Input Questions(The variable is

resources or time)IOU=

Input: Other goes Under

Terms of Trade (or “real exchange rate”)

Both countries can benefit from trade if they each have relatively lower opportunity costs. Terms of Trade- The agreed upon conditions

that would benefit both countries.Ex: Trade 1 ton of wheat for 1.5 tons of sugar

See practice Qs

KenyaIndia

Pineapples Radios30 1040 40

1. Who has an absolute advantage in Radios?2. What is the cost of one radio for India?3. What is the per unit opportunity cost for 1 pineapple for Kenya?4. Who has a comparative advantage in pineapples?5. Who has a comparative advantage in radios?6. Who should import pineapples?7. Trading 1 radio for how many pineapples would benefit both

countries?Copyright ACDC Leadership 2018

KenyaIndia

(1P costs 1/3R) (1R costs 3 P)(1P costs 1R) (1R costs 1P)

Kenya wants RadiosIf the terms of trade for 1 radio is greater than 3 pineapples then Kenya is worse off and should make radios on their own.India wants PineapplesIf the terms of trade for 1 radio is less than 1 pineapple then India is worse off and should make pineapples on their own.

What terms of trade benefit both countries?

Trading 1 radio for 2 pineapples will benefit both.If Kenya produces radios by themselves, they give up 3 Pineapples for each radio. If they can trade 2 pineapples for each radio they are better off. If India produces pineapples by themselves, they give up 1 pineapple for one radio. If they can get 2 pineapples for one radio they are better off.

The countries trade at a lower opportunity cost than if they made the products themselves!

KenyaIndia

(1P costs 1/3R) (1R costs 3 P)(1P costs 1R) (1R costs 1P)

International Trade

40353025201510 5

15 10 5

05 10 15 20 25 30 5 10 15 20Wheat (tons) Wheat (tons)

S W0 30

1.5 293 28

4.5 276 26

7.5 259 24

10.5 2312 22

13.5 2115 20

16.5 1918 18

19.5 17

S W20 0

18.5 117 2

15.5 314 4

12.5 511 69.5 78 8

6.5 95 10

3.5 11

The US Specializes and makes ONLY Wheat

Brazil Makes ONLY Sugar

USA BrazilTrade: 1 Wheat for 1.5 Sugar

TRADE SHIFTS THE PPC!Su

4540353025201510 5

15 10 5

05 10 15 20 25 30 5 10 15 20

AFTER TRADE

Wheat (tons) Wheat (tons)

International Trade

USA Brazil

2012 Audit Exam

2008 Audit Exam

Comparative Advantage PracticeCreate a chart for each of the following problems.

•First- Identify if it is a output or input question •Second-Identify who has the ABSOLUTE ADVANTAGE•Third-Identify who has a COMPARATIVE ADVANTAGE•Fourth- Identify how they should specialize

1. Sara gives 2 haircuts or 1 perm and hour. Megan gives 3 haircuts or 2 perms per hour.

2. Justin fixes 4 flats or 8 brakes per day. Tim fixes 1 flats or 5 brakes per day.

3. Hannah takes 30 minutes to wash dishes and 1 hour to vacuum the house. Kevin takes 15 minutes to wash dishes and 45 minutes to vacuum.4. Americans produce 50 computers or 50 TVs per hour. Chinese produce 30 computers or 40 TVs per hour.

Input or Output Question?Number caught per day

Deer AntelopeHenry 4 6John 24 12

Months to produce oneCar Plane

Canada 8 10Japan 15 12

Acres to produce 100 bushelsCorn Rice

Henry 9 3John 8 2

Absolute Advantage?Number caught per day

Henry 9 3John 8 2

Comparative Advantage?Number caught per day

Henry 9 3John 8 2

Deer AntelopeHenry 4 (1D=3/2A) 6 (1A =2/3DJohn 24 (1D=1/2A) 12(1A=2D)

Henry 9 3John 8 2

Deer AntelopeHenry 4 (1D=3/2A) 6 (1A=2/3D)John 24 (1D=1/2A) 12 (1A=2D)

Canada 8 (1C=4/5P) 10 (1P=5/4C)Japan 15(1C=5/4P) 12 (P=4/5C)

Henry 9 3John 8 2

Deer AntelopeHenry 4 (1D=3/2A) 6John 24 (1D=1/2A) 12

Canada 8 (1C=4/5P) 10 (1P=5/4C)Japan 15(1C=5/4P) 12 (1P=4/5C)

Henry 9 (1C=3R) 3 (1R=1/3C)John 8 (1C=4R) 2 (1R=1/4C)

IOU50Copyright

ACDC Leadership 2018

Read the New York Times article linked below.https://www.nytimes.com/2018/02/16/business/trump-economists-trade-tariffs.html

Why might countries with open trade grow faster than countries that don’t trade?Who wins and loses from a trade war?

Do you agree or disagree with the author’s conclusions?

In the News: Trade

Wonderful Wednesday, August 29 · Wonderful Wednesday, August 29 Warm up: Create a separate index...

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