Thursday, October 01, 2009

AP Economics: 1 October 2009


Current Events:

Dr. Thomas Sowell addresses the economy, FDR, and Obama.

Today's lesson plan and HW is available on the blog:


The Shanawiki page ( has updated class information.

LibraryThing has bibliographic resources.

I moved the "Blog Archive" to the top right on the blog page so it should be easier to find the daily lesson, HW, and other class material.

We are addressing Chapter 2 in particular for the parts not covered in the Quiz. We will cover the non-Quiz material in Chapter 2 for a Test on Chapter 2.

The focus of this chapter is on the basic economic choices that must be made and
on the framework for making such choices. Growth is presented in the context of a
choice between the present and the future, and policies to enhance growth are discussed.

International trade is analyzed and connected to growth.

Analyzing the Gains from Trade and the Effect of Growth

This example will be used as an in-class small group exercise
exercise. It is designed to complement the text’s material on comparative
advantage and the gains from trade. A shift in a production possibilities
curve is also included.

Learning objectives: review of the definitions of absolute advantage and comparative
advantage; application of the analysis of comparative advantage and the gains
from trade; analysis of the causes and effects of growth; and reinforcement of critical thinking skills.

The exercise is entitled Handout 2-1.

I will cover Questions #1-7; and then, in your small groups, you can work to solve the questions before we review as a class.


Cf. Absolute Advantage: "NAFTA: Are Jobs Being Sucked Out of the United States?"

Cf. Basic Concepts Graphs

Cf. Comparative Advantage

HW send to

1. Anything questions we do not answer in small group work in class today on Handout 2-1, finish for HW.

In case you did not get the questions, #1-7, I listed them here:

The figure illustrates the production possibilities for the United States and Mexico, each of which can produce crude oil and microcomputer chips. Use the figure to answer the following questions:

1) Which country has the absolute advantage in crude oil? Which country has it in microcomputer chips? Explain.

2) Which country has the comparative advantage in crude oil? Which country has it in microcomputer chips? Explain.

3) Suppose that each country is producing and consuming the combination of the two goods represented by the point labeled “a” on its production possibilities curve. Suppose further that Mexico specializes in the production of oil and then trades 5 (million barrels) of oil to the United States in exchange for 3.5 (million) computer chips. Illustrate the new combination of the two goods that can now be consumed by each country. Label the points on the graphs as “b.”

4) Explain why each country is better off at “b” than it was at “a.”

5) Suppose that Mexico experiences growth such that its production possibilities curve now has the endpoints of 15 on the vertical axis and 6 on the horizontal axis. Draw the new production possibilities curve for Mexico.

6) Explain what may have caused this growth.

7) Has Mexico’s absolute advantage changed as a result of growth? Has its comparative advantage changed? Explain why or why not.

2. If we have time, we will begin Absolute Advantage: "NAFTA: Are Jobs Being Sucked Out of the United States?" Review before the next session if we do not get to it in class today.