Global+Exchange+2

**Video outline. ** By Carolina Lista, Rubena St.Louis and Carlos Mayora
 * Global economics, global exchange 2: **

On section 1 (0:02 – 1:55)

Main idea : Reasons why Specialization and trade are considered benefitial for countries (Comparative Advantage, economies of scale)

Key concepts: Comparative advantage _is the profit that a country can gain from trade, if the country has different relative costs for producing the same goods than the others countries. Economy of scale is Reduction in cost per unit resulting from increased production. Example

Iron || On section 2 (1:57 – 3:06) Main idea : Low opportunity Cost relative to another country Key concepts: Low opportunity cost Opportunity cost is the forgone opportunity to produce another good An example of opportunity cost is the purchase of a CD, if what a person would be able to do with the money that she or he spent on the CD and that person can’t spend that money buying something else like dinner or a shirt
 * **Countries** ||  **Products**  ||  **Reasons for specialization**  ||
 * Pakistan || Rice and Grown Mangoes || Warm weather ||
 * Sweden || Paper and steel || Cold weather, forests and

Complete the chart with the corresponding information.

|| 20 cars per day || The opportunity cost in USA is than for every jean they can’t produce 2 cars || USA has a comparative advantage in the production of Jeans
 * __Country__ ||  __No. jeans produced__  ||  __No. cars produced__  ||  __Opportunity__ __cost__  ||
 * USA || 10 jeans per day
 * China || 6 jeans per day || 6 jeans per day || The opportunity cost in China is than for every jean produced they can’t produce 1 car ||

China has a comparative advantage in the production of automobiles On section 3 (3:08 – 4:49)

Main idea of: Determinants of labour productivity in a modern economy Key concepts: Skills (workers), machinery (that workers use), Organisation (of the company, firm, etc)

Hechscher and Ohlin theory look to what determine relative the Major factors in labour productivity are: 1. Skills of the workers 2. The machinery than the workers have to use 3. A well Organized Firm Example: __(Example)__ ||  __Type of workforce:__  ||  __Type of industry:__  || __Example of product__ ||
 * __Type of country:__
 * Developed Countries || Skilled labour || capital intensive || High tech-goods ||
 * Developing Countries || Unskilled labour || Labour intensive || Textiles and staples ||

JAANH YAJURI