Do You Want My Cookies Analysis
How about this, you give me your time and I’ll give you my knowledge? That sounds just like our new unit trade doesn 't it? Coincidence? I think yes. Now, if you 're thinking there 's no point in talking about something as simple as trade, then you 're thinking wrong. Trade is not as simple as “I have a cookie and you have a juice box, let’s switch”. There are many other factors involved, especially at the national level. Things such as opportunity cost, factors of production, absolute advantage, comparative advantage, and the list goes on. So let’s take a closer look at this action we probably commit every day and let’s understand it a little better.
To start off with, what is trade? Trade, as google defines …show more content…
Here is a list of five good reasons:
1. In order to get goods we don 't have, or not enough of, to support our population.
2. In order to build stronger relations between nations
3. In order to create more advanced technology
4. In order to make money
5. In order to get rid of excess amount of resources we have
Aside from this list, another major reason why nation’s trade is simply because one nation cannot make everything. Every nation has a different amount of land, labour and capital. Due to this fact, many nations are left with no other option but to specialize in a few industries and trade with other nations. This then leads to the question, how does a country know what to specialize in? The answer is something very simple and common; money. It all comes down to which item a country can produce more efficiently. In other words, the greatest quantity with the lowest price. http://onpasture.com/2015/05/18/how-not-to-fail-in-business/ This is where the factors of production come in. For a country to have a great amount of a product and still keep it cheap, they must look at how the product is produced.
The following four factors help in making this decision:
1. Land or natural resources
a. Soil and …show more content…
If we do not look at all of them closely and only pay attention to the absolute advantage, then it is possible that we will have a decrease in our profit, or in other words, a net decrease. No person, business, or country wishes to be in such a position. Therefore, we must look at each one and determine the best product for our country to trade with other countries.
Now, we 've talked about how a country decides on what product to trade, but how do they decide how much of it to trade? This isn’t as complicated as the previous information. Simply put, you decide how much to trade depending on two things: The profit you make, and the demand within your country. You do not want to trade for an unfair price. Does it make sense to trade an apple for a gold ring? Countries have to make sure what they give, they get in return. As for the demand within your country you must see how much of your product you must keep within your country to support your people. At the end, what you want to aim for is trading excess resources or products. You never want to cheat your people of their rightful