Economic Interdependence

Francisci WG.9(a)

Remember:• Interdependence: When nations

must trade for resources they do not have.

• Global trade market exists to import and export goods, services, and capital resources.

• Export: Shipping of goods or services out of a country.

• Import: Bringing in of goods and services into a country.

Factors that Influence Economic Activity:

• Access to human, natural and capital resources

1. Skilled Workers – More in developed countries2. Natural Resources – If a country gathers its resources and exports them, that country is probably developing.

Factors that Influence Economic Activity:

3. Technology – Developed countries have better access to new technology.4. Transportation – Developed countries well constructed and strong infrastructure.5. Investment Capital – Developed countries have more capital resources.

Factors that Influence Economic Activity:

• Location and ability to exchange goods1. Landlocked Countries: Country that is completely surrounded by land with no access to a sea or ocean (Water is the cheapest way to transport goods). Ex. Paraguay, Democratic Republic of the Congo.2. Coastal and Island Countries: Have greater access to seas and/or oceans to transport goods cheaply. Ex. Japan, U.S. and UK.

Factors that Influence Economic Activity:

3. Proximity to Shipping Lanes: Countries located near major trade routes have an economic advantage. Ex. Singapore, Egypt (Suez Canal), Panama (Panama Canal).4. Communication Networks: Developed countries have a stronger infrastructure which makes it easier to communicate within the country and with other regions as well.

What is Comparative Advantage?

Comparative Advantage: The ability of countries to produce goods and services at lower relative costs than other countries, resulting in exports of goods and services.

Why does Comparative Advantage exist?

• Comparative advantage exists because of the unequal distribution of natural resources across Earth’s surface (this is very good for developing countries).

Effects of Unequal Distribution of Natural Resources:

• Countries specialize in goods and services they can market for a profit (Countries usually produce goods and services that use their own available natural resources).

• Countries exchange goods & services• A country will export (exit the

country) what it can market.• A country will import (into the

country) what it needs.• Trade: The exchange of goods and

services between countries.

Effects of Comparative Advantage on International Trade:

• Countries produce goods and services they can market for a profit.

• Workers develop specific skills (specialization of labor).

• Nations develop specific industries (Ex. steel industry, aircraft production, automobile industry, clothing industry).

Russia’s uses of Natural Resources:

• Numerous resources (minerals, metals, oil, and natural gas).

• Natural resources are located in areas that are not economically profitable to develop.

United States use of Natural Resources:

• Diversified economy• Abundant natural

resources (forests, freshwater, oil and mineral deposits, along with fertile soil, coal and natural gas).

• Specialized industries

Switzerland’s use of Natural Resources:

• Limited natural resources (iron, manganese, some coal)

• Produce services on global scale

• Ex. Known for banking industry on global market

Japan’s use of Natural Resources:

• Highly industrialized (developed)

• Major manufacturing region (cars like Honda, Toyota and Mitsubishi, electronics like Sony, Panasonic, etc).

• Very limited natural resources

• Most valuable resource is skilled labor (human resource).

Cote d’Ivoire (kout divwar) use of Natural Resources:

• Cote d’ivoire: a republic in western Africa on the Gulf of Guinea; one of the most prosperous and politically stable countries in Africa.

• Limited natural resources• Cash crops exchanged for

manufactured goods (commercial farming)