Superior Essay Writers | International trade.

International trade.

Your son is graduating from high school and is about to enter the work force. He has developed a strong curiosity about our economic system and how it works. Because you have a good understanding of basic economics, he has asked you to explain several concepts that are essential to an understanding of how the economy works. Your son has asked you to explain the following concepts and ideas:

Absolute and comparative advantage: Explain how these concepts describe the benefits and costs of international trade.
“Invisible hand”: What is it and how does it affect the decision-making process in our economic system?
Circular flow diagram: Include the government sector in your explanation, a description of the roles that each participant plays in the economy, and how the different sectors interact in the markets.
The Production Possibilities model: Provide an example and include a summary of what the model is illustrating and the economic implications for the economy.
Microeconomics and macroeconomics: Explain the differences between the two and why economics is divided into these two subdivisions.

Share on Facebook

Sample Answer

Absolute and Comparative Advantage

Absolute advantage is the ability to produce a good or service at a lower cost than another producer. Comparative advantage is the ability to produce a good or service at a lower opportunity cost than another producer.

The benefits of international trade come from specialization and comparative advantage. When countries specialize in producing the goods and services that they have a comparative advantage in, they can produce more of those goods and services with the same amount of resources. This leads to lower prices for consumers and higher profits for producers.

The costs of international trade come from the loss of jobs in industries that are no longer competitive. However, the benefits of trade typically outweigh the costs.

Invisible Hand

The invisible hand is a metaphor for the unintended consequences of individual actions in a market economy. Adam Smith, the Scottish economist who first described the invisible hand, argued that individuals who are motivated by self-interest will often produce the goods and services that society needs.

Full Answer Section

The invisible hand works because individuals who are trying to make a profit will produce goods and services that consumers want to buy. When consumers buy these goods and services, they are signaling to producers that they want more of them. This creates a demand for the goods and services, which encourages producers to make more of them.

Circular Flow Diagram

The circular flow diagram is a model of the economy that shows how money flows between households, firms, and the government. The diagram is divided into two loops: the product market loop and the factor market loop.

In the product market loop, households sell their labor and other factors of production to firms in exchange for money. Firms use this money to buy the factors of production and to produce goods and services. The goods and services are then sold to households in the product market.

In the factor market loop, households receive money from firms in exchange for their labor and other factors of production. Households use this money to buy goods and services in the product market.

The government is also included in the circular flow diagram. The government collects taxes from households and firms and uses this money to provide goods and services, such as education and healthcare. The government also regulates the economy by setting taxes, regulations, and laws.

Production Possibilities Model

The production possibilities model is a model that shows the different combinations of goods and services that an economy can produce with its limited resources. The model is represented by a curve called the production possibilities frontier (PPF).

The PPF shows the maximum amount of one good that can be produced for every unit of another good that is given up. For example, if an economy is producing 100 cars, it can only produce 50 computers. If the economy wants to produce 150 cars, it must give up 25 computers.

The PPF is a useful tool for understanding the concept of opportunity cost. Opportunity cost is the cost of giving up something in order to get something else. In the example above, the opportunity cost of producing 150 cars is 25 computers.

Microeconomics and Macroeconomics

Microeconomics is the study of individual decision-making in the economy. It focuses on the behavior of households, firms, and markets. Macroeconomics is the study of the economy as a whole. It focuses on topics such as inflation, unemployment, and economic growth.

Microeconomics and macroeconomics are two different but complementary perspectives on the economy. Microeconomics provides the foundation for macroeconomics. Macroeconomics uses the insights from microeconomics to understand the behavior of the economy as a whole.

This question has been answered.

Get Answer

Subject:
Type:
Pages/Words:
	Single spaced
	approx 275 words per page
Urgency:
Level:
Currency:
Total Cost:

No More Worries!

Paper Formatting

No Lateness!

Our Guarantees

International trade.

This question has been answered.

Price Calculator

12% Discount

Why Choose Us