WHY DO

NATIONS TRADE?
THE MOVEMENT OF GOODS AND SERVICES AROUND THE GLOBE

Coming and Going Imports and Exports Throughout the World

• International Trade is the
exchange of goods and services
between nations across
international borders.
• It occurs when one nation has
something that another nation
wants.
• Trade only occurs if the two
nations feel they will be better
off after the trade than they
were before.

Coming and Going Imports and Exports Throughout the World

 • Nations trade when the benefit
of the exchange is greater than
the cost.
• Nations produce the goods and
services they do best and trade
for things they do not make
well.
• Why make something in your
own country when you can get
it cheaper from another
country?

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• Comparative advantage
refers to an economy's ability
to produce goods and services
at a lower opportunity cost
than that of trade partners.
• Both the U.S. and Bangladesh
can produce a shirt, but
Bangladesh can accomplish
the task with much lower production costs than the U.S. (wages).
• It doesn’t make sense for the U.S. to produce shirts and should trade
with Bangladesh for them.

Coming and Going Imports and Exports Throughout the World

• The concept of comparative
advantage suggests that
Superman should focus on
tasks that others can't do well,
like stopping runaway trains or
transporting nuclear weapons
into deep space so they can
detonate safely.

Coming and Going Imports and Exports Throughout the World

• Nations trade goods and services
• Goods are physical items of value such as cars, oil, clothing and
agriculture
• Services are intangible products of value such as education,
insurance, tourism, banking, accounting, and expertise.

Coming and Going Imports and Exports Throughout the World

• An import is a product
your home country
acquires from another
country.
• An export is a product
produced in your home
country and sold to
consumers in other
nations.

Coming and Going Imports and Exports Throughout the World

• In the 19th Century, a settler on the
Great Plains had to make his own
shelter and clothes, grow his own
food, find his own water and energy,
provide his own medical care and
education for the children, defend
himself, and produce everything else
for survival.
• Every moment of one’s life was consumed by pursuing the basics
and little time was left for enjoyment.
• Life was extremely difficult and many families didn’t survive.

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• Today, we specialize in a line of work that we’re good at and get paid
for our effort.
• The income allows us to trade for the things we don’t do well like
growing food, making clothes, and providing health care.
• Because we specialize and trade, we have a much higher standard
of living and have ample time for enjoyment and recreation.

Coming and Going Imports and Exports Throughout the World

• We would have to pay more money for items we want.
• There would be many items we couldn’t acquire because we would
run out of or lack the resources to produce them.
• Many of us would have to work at jobs we’re not suited for just to
make sure there are enough necessities for all.

Coming and Going Imports and Exports Throughout the World