Chapter 3 Reflections: Interdependence and the Gains from Trade.

1. What surprised you most about the concepts in this chapter?  Why?
2. What is your opinion about international trade?  Overall is it good or bad?  Why?

There were several concepts in this chapter dealing with Interdependence (countries/people/entities being mutually reliant on one another) and the benefits or gains from trade...

1. Specialization and Trade

2. Absolute Advantage
3. Opportunity Costs and Comparative Advantage
4. Comparative Advantage and Trade
5. The Price of Trade
6. The US trading with other countries. 

I think the thing that surprised me most about the concepts in this chapter is that two (or more) people could work together, each produce what they were good at producing, each produce what the other was producing and both come out benefiting from the other's work, neither having to work any longer or harder. 

The example of the potato farmer and the cattle rancher was used to talk about how much meat the rancher produced in a specific time and how many potatoes the farmer was able to produce in the same time and how they ended up trading with each other. While it seemed that the potato farmer wasn't producing as many potatoes and as much meat as the cattle rancher the potato farmer had the comparative advantage (she had the ability to produce potatoes at a lower opportunity cost than the cattle rancher). The cattle rancher who produced both meat and potatoes still had absolute advantage because he was able to produce more of both in a shorter amount of time. 

International Trade

Because of technology our world seems to be a much smaller place. We are able to send and receive data almost instantaneously to anywhere in the world. We are able to communicate and participate in dialogues with anyone almost anywhere. This was not always so. 

The question was, "Overall, is international trade good or bad?" I think it's inevitable. I think it's not just good, but great! I think the more that we participate in trade with other countries that we are acting more as a global citizen than just a citizen of the US or UK or India or wherever. Trade bridges nations together instead of dividing them. We can all benefit from the goods and services from other countries and it helps us to get out of our bubble, experience new ideas and concepts, broadens our horizons, makes us richer (not just in the financial sense) as a people. We can all identify with one another and we can all learn from one another. 

Chapter 2 Reflections- Thinking Like an Economist

1. How does the use of a very simplified model of the economy such as those found in a production possibilities frontier help you to understand the economy?
2. Give an example of a positive or normative statement about the economy.  Why does it matter which it is?

The production possibilities frontier: 
This is a graph that shows the combinations of output that the economy can possibly produce given  the available factors of production and the available production technology.

We'll use the example from the book. Let's say that Product A is the number of computers produced and that Product B is the quantity of cars produced. If an economy puts all of its resources into only Product A (computers) then there will be no cars manufactured. Same thing with Product B (computers). If an economy puts all of its resources into only making computers then no cars will be made.

Each point (A, B, and C) represent the factors of production: At point A, an economy can produce X number of Product A and X number of Product B. 

Points outside the PPF (point Y, in this case) represent a point at which nothing will be produced because of the lack of economic resources or other factors. 

If the points are on the PPF (points A, B, and C) this shows that production is efficient. 

Point X shows inefficiency. Resources are NOT being used to produce the most that they could. 

Now, for the positive or normative statement about the economy...

First, I will define which each statement means. 

Positive Statements: They describe; They make a claim about what the world IS. Statements can be backed up with facts. 

Normative Statements: They are prescriptive; They make a claim about how the world OUGHT TO BE. Statements are opinion and do not have to be backed up with facts. 

"The welfare system should be limited to those desperately in need for a certain amount of time, not a lifetime."

This statement is normative. This is merely my opinion and there are several factors that need to be looked at before any changes would be made. While I could back this statement up with many ideas of why I think this statement is true, I cannot point to ONE piece of data that makes it true. 

Chapter 1: Reflections- Ten Principles of Economics

1. What in this chapter made you think about an economic concept differently than your previous beliefs?  
2. What new questions do you have now about the US economy based on this chapter?

Economic Concept: 

"A Country's Standard of Living Depends on its Ability to Produce Goods & Services."

There has been a lot of talk about how the rest of the world perceives the United States. I can't tell you how many times I've heard an actor or some other high profile celebrity say, "I'm going to leave the U.S. and move to Canada" because their particular political party didn't win the Presidential election. They actually believe "the grass is greener" concept when it comes to other countries and how those governments are run. I am of the belief that each country has its negatives and positives whether it's climate, government, laws, population, technology, health care, food, way of living, cost of living, etc. 

What has made the U.S. a huge target when it comes to the world stage is that in the past century we have been  one of, if not the leader in commerce and industry. Our products, like Coke, Nike, automobiles and chain stores like Walmart, Starbucks, and McDonald's are EVERYWHERE! 

Check out these American exports.

Do countries such as China, Iran, India, or France, just to name a few, really hate us or do they just envy us? Why do terrorists regimes seem to target American embassies and the US in general? Is it because they hate our political policies, our way of living or are they so steeped in tradition that they see our progressive ideas as a threat to their way of living? I think it's a combination of all of these things. American products are in just about every country and on every continent in the world. I don't see this as a bad thing, if you're America. 

Why, just yesterday, I read this article about former French President Nicolas Sarkozy wanting to leave his own country. It seems to me that France could be producing and exporting more instead of gouging its citizens. 75% just seems to me a ridiculous amount of tax for each citizen to pay...or is it just me?

Global Income Inequality is a huge problem here in the US. The recent debate and near hysteria that has been caused by our government about raising taxes for the wealthy to compensate for the lack of funds in the government coffer. 

Going back to the original concept of "A Country's Standard of Living Depends on Its Ability to Produce Goods." Prior to reading this chapter I would have said that this concept was right on. But I question its completeness in thought. Take China, for example. China, while their products permeate the world market I wouldn't say that the Standard of Living is comparable to the US. We in the US live in a democracy, where free trade reigns and free market regulatory systems are in place for us to enjoy the benefits. China has had a communist system for decades and has been closed to the world for centuries. Only now that they have opened themselves up to trade and a little bit of capitalism have the average citizens of China been able to enjoy a more quality standard of living.