经济学原理.docx

经济学原理.docx

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经济学原理

3

INTERDEPENDENCEANDTHEGAINSFROMTRADE

WHAT’SNEWINTHESEVENTHEDITION:

ThereisanewInTheNewsfeatureon"EconomicswithinaMarriage."

LEARNINGOBJECTIVES:

Bytheendofthischapter,studentsshouldunderstand:

Øhoweveryonecanbenefitwhenpeopletradewithoneanother.

Øthemeaningofabsoluteadvantageandcomparativeadvantage.

Øhowcomparativeadvantageexplainsthegainsfromtrade.

Øhowtoapplythetheoryofcomparativeadvantagetoeverydaylifeandnationalpolicy.

CONTEXTANDPURPOSE:

Chapter3isthethirdchapterinthethree-chaptersectionthatservesastheintroductionofthetext.Chapter1introducedtenfundamentalprinciplesofeconomics.Chapter2developedhoweconomistsapproachproblems.Thischaptershowshowpeopleandcountriesgainfromtrade（whichisoneofthetenprinciplesdiscussedinChapter1）.

ThepurposeofChapter3istodemonstratehoweveryonecangainfromtrade.Tradeallowspeopletospecializeintheproductionofgoodsforwhichtheyhaveacomparativeadvantageandthentradeforgoodsthatotherpeopleproduce.Becauseofspecialization,totaloutputrises,andthroughtradeweareallabletoshareinthebounty.Thisisastrueforcountriesasitisforindividuals.Becauseeveryonecangainfromtrade,restrictionsontradetendtoreducewelfare.

KEYPOINTS:

∙EachpersonconsumesgoodsandservicesproducedbymanyotherpeoplebothintheUnitedStatesandaroundtheworld.Interdependenceandtradearedesirablebecausetheyalloweveryonetoenjoyagreaterquantityandvarietyofgoodsandservices.

∙Therearetwowaystocomparetheabilityoftwopeopletoproduceagood.Thepersonwhocanproducethegoodwithasmallerquantityofinputsissaidtohaveanabsoluteadvantageinproducingthegood.Thepersonwhohasthesmalleropportunitycostofproducingthegoodissaidtohaveacomparativeadvantage.Thegainsfromtradearebasedoncomparativeadvantage,notabsoluteadvantage.

∙Trademakeseveryonebetteroffbecauseitallowspeopletospecializeinthoseactivitiesinwhichtheyhaveacomparativeadvantage.

∙Theprincipleofcomparativeadvantageappliestocountriesaswellastopeople.Economistsusetheprincipleofcomparativeadvantagetoadvocatefreetradeamongcountries.

CHAPTEROUTLINE:

Beginbyexplainingthattherearetwobasicwaysthatindividualscansatisfytheirwants.Thefirstistobeeconomicallyself-sufficient.Thesecondistospecializeintheproductionofonethingandthentradewithothers.Withrareexceptions,individualsandnationstendtorelyonspecializationandtrade.Onewaytodemonstratethisistosurveythestudentsontheirfutureplans（doctors,lawyers,teachers,etc.）.Pointoutthattheyplantospecializeandtrade.Askthemwhythisisoptimal.

I.AParablefortheModernEconomy

A.Example:

twogoods—meatandpotatoes;andtwopeople—acattleranchernamedRoseandapotatofarmernamedFrank（eachofwhomlikestoconsumebothpotatoesandmeat）.

1.ThegainsfromtradeareobviousifFrankcanonlygrowpotatoesandRosecanonlyraisecattle.

2.Thegainsfromtradearealsoobviousif,instead,Frankcanraisecattleaswellasgrowpotatoes,butheisnotasgoodatitandRosecangrowpotatoesinadditiontoraisingcattle,butherlandisnotwellsuitedforit.

3.ThegainsfromtradearenotasclearifeitherFrankorRoseisbetteratproducingbothpotatoesandmeat.

Makesurethatyouwriteoutallofthealgebrainvolvedinthisexample.Ifyouleaveoutsteps,studentswillnotunderstandhowthesecalculationsaremade.

B.ProductionPossibilities

1.FrankandRosebothworkeighthoursperdayandcanusethistimetogrowpotatoes,raisecattle,orboth.

2.Figure1showstheamountoftimeeachtakestoproduceoneounceofeithergood:

Figure1

MinutesNeededtoMakeOneOunceof:

AmountProducedinEightHours

Meat

Potatoes

Meat

Potatoes

Frankthefarmer

60min./oz.

15min./oz.

8/1=8oz.

8/0.25=32oz.

Rosetherancher

20min./oz.

10min./oz.

8/0.33=24oz.

8/0.16=48oz.

ALTERNATIVECLASSROOMEXAMPLE:

MarthaandStewarteachspendeighthoursadaywallpaperingandpainting:

HoursNeededtoDoOneRoom

RoomsFinishedin40Hours

Paint

Wallpaper

Paint

Wallpaper

Martha

2hours/room

8hours/room

8/2=4rooms

8/8=1room

Stewart

4hours/room

10hours/room

8/4=2rooms

8/10=0.8room

3.Theproductionpossibilitiesfrontierscanalsobedrawn.

a.Theseproductionpossibilitiesfrontiersaredrawnlinearlyinsteadofbeingbowedout.ThisassumesthatFrank'sandRose'stechnologyforproducingmeatandpotatoesallowsthemtoswitchbetweenproducingonegoodandtheotherataconstantrate.

b.AswesawinChapter2,theseproductionpossibilitiesfrontiersrepresenttheprinciplesoftrade-offsandopportunitycosts.

Itisimportanttotakethetimetoexplainhowtocalculatethex-andy-intercepts.PointoutthatFrankcouldproduce8ouncesofmeatifallofhistimeisspentonmeator32ouncesofpotatoesifallofhistimeisspentonpotatoes.

4.WewillassumethatFrankandRosedividetheirtimeequallybetweenraisingcattleandgrowingpotatoes.

a.Frankproduces（andconsumes）atpointA—16ouncesofpotatoesand4ouncesofmeat.

b.Roseproduces（andconsumes）atpointB—24ouncesofpotatoesand12ouncesofmeat.

Youshouldemphasizethattheseproductionpossibilitiesfrontiersrepresentthefarmer’sandtherancher’sconsumptionpossibilitiesbecauseweareassumingthatthereisnotrade.

C.SpecializationandTrade

1.SupposeRosesuggeststhatFrankspecializeintheproductionofpotatoesandthentradewithherformeat.

a.Rosewillspendsixhoursadayproducingmeat（18ounces）andtwohoursaweekgrowingpotatoes（12ounces）.

b.Frankwillspendeighthoursadaygrowingpotatoes（32ounces）.

c.Rosewilltrade5ouncesofmeatfor15ouncesofpotatoes.

Studentswillaskhowthis“price”isdetermined.Explaintherangeofpricesthateachparticipantwouldbewillingtoaccept.

2.Endresults:

a.Roseproduces18ouncesofmeatandtrades5ounces,leavingherwith13ouncesofmeat.Shealsogrows12ouncesofpotatoesandreceives15ouncesinthetrade,leavingherwith27ouncesofpotatoes.

b.Frankproduces32ouncesofpotatoesandtrades15ounces,leavinghimwith17ounces.Healsoreceives5ouncesofmeatinthetradewithRose.

3.Inbothcases,theyareabletoconsumequantitiesofpotatoesandmeatafterthetradethattheycouldnotreachbeforethetrade.

Provetoyourstudentsthatitwouldtakeeachofthemmorethaneighthourstoproducethesequantitiesontheirown.

Figure2

II.ComparativeAdvantage:

TheDrivingForceofSpecialization

A.AbsoluteAdvantage

1.Definitionofabsoluteadvantage:

theabilitytoproduceagoodusingfewerinputsthananotherproducerdoes.

2.Rosehasanabsoluteadvantageintheproductionofbothpotatoesandmeat.

B.OpportunityCostandComparativeAdvantage

1.Definitionofopportunitycost:

whatevermustbegivenuptoobtainsomeitem.

Table1

a.ForRose,ittakestenminutestoproduceoneounceofpotatoes.Thosesametenminutescouldbeusedtoproduceone-halfounceofmeat.Thus,theopportunitycostofproducinganounceofpotatoesisone-halfounceofmeat.

b.ForFrank,ittakes15minutestoproduceoneounceofpotatoes.Thosesame15minutescouldbeusedtoproduceone-fourthounceofmeat.Therefore,theopportunitycostofproducingoneounceofpotatoesisone-fourthounceofmeat.

c.Theopportunitycostofproducingoneounceofmeatistheinverseoftheopportunitycostofproducingoneounceofpotatoes.

Yourstudentsmayhaveahardtimecomprehendingthis.Makesurethatyougothroughthesecalculationsseveraltimesandwriteouteverystepontheboard.

2.Definitionofcomparativeadvantage:

theabilitytoproduceagoodataloweropportunitycostthananotherproducer.

a.Frankhasaloweropportunitycostofproducingpotatoesandthereforehasacomparativeadvantageintheproductionofpotatoes.

b.Rosehasaloweropportunitycostofproducingmeatandthereforehasacomparativeadvantageintheproductionofmeat.

3.Becausetheopportunitycostofproducingonegoodistheinverseoftheopportunitycostofproducingtheother,itisimpossibleforapersontohaveacomparativeadvantageintheproductionofbothgoods.

C.ComparativeAdvantageandTrade

1.Whenspecializationinagoodoccurs（assumingthereisacomparativeadvantage）,totaloutputwillgrow.

2.Aslongastheopportunitycostofproducingthegoodsdiffersacrossthetwoindividuals,bothcangainfromspecializationandtrade.

a.Frankbuys5ouncesofmeatwith15ouncesofpotatoes.Thisimpliesthatthepriceofeachounceofmeatisthreeouncesofpotatoes,whichislowerthanFrank'sopportunitycostoffourouncesofpotatoes.TradeisbeneficialtoFrank.

b.Rosebuys15ouncesofpotatoesfor5ouncesofmeat.Thepriceofeachounceofpotatoesisone-thirdounceofmeat.ThisislowerthanRose'sopportunitycostofone-halfounceofmeat.TradealsobenefitsRose.

D.ThePriceoftheTrade

1.Forbothpartiestogainfromtrade,thepriceatwhichtheytrademustliebetweentheopportunitycosts.

2.Inourexample,FrankandRosemusttradeattherateofbetween2and4ouncesofpotatoesforeachofmeat.

Activity1—CreatingComparativeAdvantageExamples

Type:

In-ClassAssignment

Topics:

Specialization,interdependence,self-interest,comparativeadvantage

Materialsneeded:

3-5candybars（orsimilaritemstouseasprizes）

Time:

15minutes（firstday）,dependsonnumberofgroups（secondday）

Classlimitations:

worksinanysizeclass

Purpose

Thisassig