Economic Summit 2006 Beyond Our Backyard Thinking Globally:

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Economic Summit 2006 Beyond Our
Backyard Thinking Globally

• Texas Council on Economic Education
• COMPARATIVE ADVANTAGE

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TEXAS COUNCIL ON ECONOMIC EDUCATION

• Comparative Advantage
• Economic Concepts
• Absolute Advantage
• Specialization
• Opportunity Cost
• Voluntary Trade
• Interdependence

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TEXAS COUNCIL ON ECONOMIC EDUCATION

• Definitions
• Absolute Advantage The ability to produce more
  units of a good or service than some other
  producer using the same quantity of resources.
• Comparative Advantage The ability to produce a
  good or service at a lower opportunity cost than
  another producer.

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TEXAS COUNCIL ON ECONOMIC EDUCATION

• Definitions
• Opportunity Cost When producers decide to
  produce something, they also decide not to
  produce something else. The opportunity cost of
  production is the value of the good that is not
  produced.

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TEXAS COUNCIL ON ECONOMIC EDUCATION

• Definitions
• Economic or Trade Specialization When producers
  (individuals, businesses, or nations) concentrate
  their production on fewer kinds of goods and
  services than they consume.

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TEXAS COUNCIL ON ECONOMIC EDUCATION

• Definitions
• Voluntary Trade The unforced exchange of goods
  and services among individuals, businesses and
  nations.
• Interdependence The effect of not producing
  everything that is to be consumed reliance on
  someone else.

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TEXAS COUNCIL ON ECONOMIC EDUCATION

• COMPARATIVE ADVANTAGE
• IF
• Everyone does what they do best, and
• Everyone freely trades with everyone else, THEN
• Total PRODUCTION increases, and
• Total CONSUMPTION increases

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______________Trading Exchange Record
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______________Trading Exchange RecordFARMER
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______________Trading Exchange RecordTAILOR
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______________Trading Exchange RecordBUILDER
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You are a FARMER and youPRODUCE
400 UNITS OF FOOD

• 1.Food____Clothing____Shelter____Balance_____
• 2.Food____Clothing____Shelter____Balance_____
• 3.Food____Clothing____Shelter____Balance_____
• 4.Food____Clothing____Shelter____Balance_____
• 5.Food____Clothing____Shelter____Balance_____
• 6.Food____Clothing____Shelter____Balance_____
• 7.Food____Clothing____Shelter____Balance_____
• 8.Food____Clothing____Shelter____Balance_____
• 9.Food____Clothing____Shelter____Balance_____