2 Model Building and Gains from Trade

• globalized trade is not without controversy.
• Not everyone benefits equally when goods and jobs are free to move across borders.
• Consider the case of a U.S. worker who lost her job when she moved to India to work at a call center.
• The process of finding a new job requires a lot of time and energy.
• The new position in the call center in India gives a job and an income that improves the life of another worker.
• The advantage of being able to hire lower- cost labor elsewhere is enjoyed by the U.S. firm.
• Lower costs can translate into lower prices for domestic consumers.

• The outsourcing of jobs is painful for affected workers, but it is an important component of economic growth in the long run.

• Now that you've begun your exploration of economics, you know that it's not bad.
• Big questions about life are asked by economists.

• The study of economics is fascinating because of this.
• It is not nearly as difficult to understand how an entire economy works as it sounds.

• The process of learning to drive a car is the same.
• When you're first learning to drive, it's hard.
• You can become a good driver very quickly if you learn and practice a few key principles.
• You can drive any car with experience.

• Once you have learned the basics of economics, you can use them to analyze almost any problem.

• Our economy is dependent on specialization.

• In this book, we look at five foundations of economics--incentives, trade-offs, opportunity cost, marginal thinking, and the principle that trade creates value.
• Even complex economic processes can be reduced to smaller, more easily understood parts once you have mastered these five concepts.
• Understanding economics is rewarding and fun if you keep these foundations in mind.

• A recent study found that many employees in the United States have a bachelor's degree but no advanced degree.

• Some majors are better than others.
• Majors that produce more income initially do not keep their advantage over time.
• Political science majors have a lower starting salary than business majors, but eventually surpass them.
• Pay growth is more important to income level than starting salary.
• Will you make more by majoring in economics at the beginning of your career is misleading.

• Business Management Economics is a study of how people allocate their limited resources.
• Because of the limited nature of society's resources, even the most abundant resources are not always plentiful enough to meet everyone's needs.
• The basic question economists seek to answer is this.

• The principle that trade creates value is one of the five foundations of economics.

• Incentives help explain how rational deci sions are made.

• When a decision maker has to make a decision, there are trade- offs.

• We experience either an opportunity cost or a lost chance when we make a choice.

• Marginal thinking requires a decision maker to weigh the benefits against the costs.

• Trade creates value because participants in markets can specialize in the production of goods and services that they have a comparative advantage in making.

• This is an incentive problem.

• You learn that you can sell a ticket to someone else to help you move from one game to another.

• Referred to events in the news or a 50-inch television for $199 will give you an idea of the price of the model.
• Discuss how one example of each of the five foundations might be willing to wait in line three economics.

• Coffee is not very good at making computer tion, and Canada is good at making it, but not very good at growing it.

• Patrick was able to achieve his goal by buying an orange pen fromJill.
• Patrick was willing to crave.
• If you want to watch the full movie trailer for the pen, you have to pay $2.50, but if you want to sell the pen, you have to pay $1.25.

• Hillary was in a car with his girlfriend.
• She would have to give up something in exchange for making you $10,000 a year.

• We talked about how trade creates value.

• The price they agreed on was $7,500.

• It is hard to see the women's choice as you paid for them, you have a positive rational when examining it using marginal incentive to resell them.

• Hundreds of hours in line is a direct result of the sales tax holiday.
• The hourly back- to- school period and high opportunity cost make it difficult to buy more clothes.
• The policy of value their time by using a conse rate that is too high is a bad idea.
• Saving $200 but spending 500 hours makes their time worth a tax holiday.

• If Colombia decided to specialize in the job at minimum wage for 40 hours and earn production of coffee, it could trade coffee for enough money to purchase a TV at full Canada in exchange for computer software.

• Gains from specializa are shown in this process.
• They don't seem to trade.
• Both countries are aware of the cost of time.

• Patrick is better off by $0.50.
• Canada has a workforce that is just $2.00, and Colombia has ideal coffee because he was willing to pay $2.50 but paid conditions.
• The person is better off because he is more skilled at writing software.
• She was paid $2.00 because Patrick countries specialize in what they do best.
• The total value created is able to produce more value than the addi produce, which adds up to $1.25.

• He would have accepted $6,000 for the women to wait in line.
• They will save $200 when they price him.
• Buy the TV with the value added.
• They face a lot of trade offs, which is the difference between missed sleep, time they could have between the maximum price she would have spent with family members and friends, and the price she actually paid the time they could be working instead.
• $4,000 is the total cost of waiting in line.