Professional Documents
Culture Documents
FOURTH EDITION
N. G R E G O R Y M A N K I W
PowerPoint Slides
by Ron Cronovich
2007 Thomson South-Western, all rights reserved
CHAPTER 3
Interdependence
Every day
you rely on
many people
from around
the world,
most of whom
you do not know,
to provide you
with the goods
and services
you enjoy.
CHAPTER 3
INTERDEPENDENCE
Interdependence
One of the Ten Principles of
Economics from Chapter 1:
Trade can make
everyone better off.
CHAPTER 3
Our Example
Two countries: the U.S. and Japan
Two goods: computers and wheat
One resource: labor, measured in hours
We will look at how much of both goods
each country produces and consumes
CHAPTER 3
CHAPTER 3
Wheat
(tons)
5,000
4,000
3,000
2,000
1,000
0
CHAPTER 3
Computers
100
500
Wheat
(tons)
5,000
4,000
3,000
2,000
1,000
0
CHAPTER 3
Computers
100
500
ACTIVE LEARNING
1:
Japans PPF
Wheat
(tons)
2,000
1,000
0
CHAPTER 3
Computers
100
200
300
10
1,000
0
CHAPTER 3
Computers
100
200
300
11
Without trade,
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A C T I V E L E A R N I N G 2:
Wheat
(tons)
5,000
4,000
3,000
2,000
1,000
0
CHAPTER 3
Computers
100
500
14
2,000
1,000
0
CHAPTER 3
Computers
100
200
300
15
International Trade
Exports:
goods produced domestically and sold abroad
Imports:
goods produced abroad and sold domestically
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16
A C T I V E L E A R N I N G 3:
17
computers
wheat
5,000
produced
160
3400
+ imported
110
4,000
exported
700
3,000
= amount
consumed
270
2700
2,000
1,000
0
CHAPTER 3
Computers
100
500
18
computers
wheat
produced
240
+ imported
700
exported
110
= amount
consumed
130
700
1,000
0
CHAPTER 3
Computers
100
200
300
19
computers
250
270
20
wheat
2,500
2,700
200
Japan
consumption
without trade
computers
120
130
10
wheat
600
700
100
CHAPTER 3
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21
22
23
Opportunity Cost
and Comparative Advantage
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24
Opportunity Cost
and Comparative Advantage
25
26
A C T I V E L E A R N I N G 4:
A C T I V E L E A R N I N G 4:
Answers
Brazil has an absolute advantage in coffee:
Unanswered Questions.
29
CHAPTER SUMMARY
Interdependence and trade allow everyone to
enjoy a greater quantity and variety of goods &
services.
30