Video+2+Outline

**Global economics, global exchange 2:** **Video outline**

On section 1 (0:02 – 1:55)

Main idea: Specialization and trade have two characteristics that are considered beneficial for a country, first comparative advantage and second Economy of scale.

Key concepts: Comparative advantage: emphasises differences in countries resources and productivity levels Economy of scale is the greatest scale of production, makes production more efficient which lowers the cost per unit of output.

Example

__iron__ || On section 2 (1:57 – 3:06) Main idea: A country can have a comparative advantage if they produce a good at the lower opportunity cost relative to another country. Key concepts: Opportunity cost is the forgone opportunity to produce some other good __An example of opportunity cost of a CD is what you would been able to do with the ten dollars that you used just buying a CD, like__ __eat dinner_____ and__ buy a shirt_
 * **Countries** || **Products** || **Reasons for specialization** ||
 * Pakistan || __Rice and mangoes___ || Warm weather_ ||
 * ___Sweden___ || Paper and steel || Cold weather, forests and

Complete the chart with the corresponding information.


 * __Country__ || __No. jeans produced__ || __No. cars produced__ || __Opportunity__ __cost__ ||
 * _China_ || ___6__ || _6 || The opportunity cost to producing a jean in China is one car ||
 * __USA__ || _10_ || _20_ || The opportunity cost to producing a jean in USA is two cars ||

_China has a comparative advantage in _producing jeans

_USA has a comparative advantage in producing automobiles_

__ On section 3 (3:08 – 4:49) __

__Main idea of this section is “In theory there are three determinants of labour productivity that are also defined as “the pattern of trade”: skill machinery and organization”__

__Key concepts:__

__Hechscher and Ohlin theory looked what determinants relative labour productivity, and that is the pattern of trade.__ __Major factors in labour productivity are:__ __1.____skills of the workers__ __2.__ __machinery that workers have to use__ __3.__ __organization of the firm_____

Example: __(Example)__ || __Type of workforce:__ || __Type of industry:__ || __Example of product__ ||
 * __Type of country:__
 * Developed countries (industrialised) || skilled labour || Capital intensive || Automobiles and high tech products ||
 * Developing countries(less industrialized countries) || unskilled labour || Labour intensive || Textiles and basic staples ||