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Chapter 1: Ten Principles of Economics- Principle 5: Trade Can Make Everyone Better Off


The fifth principle of economics is trade can make everyone better off. Although one may think countries that compete by producing the same goods are against one another, but by specializing in the production of one good relative to the other good, countries can maximize the production of goods between both countries. Ideas of trade can be seen in a household dynamic or when shopping. This theory of trade can be seen in the United States. The Chinese, the French, and the Egyptians are the United States's partners in trading.

To start with the household dynamic, think of when a family member looks for a job. When looking for a job, he/she is competing with everyone else looking for that job. Similarly, shoppers are competing with one another when trying to find goods at the lowest prices. This comes to show that trade affects your family, since many of the same ideas are paralleled in every day activities.

The idea of trade making everyone better off is talked about on the United States Trade Representative website. As directly stated on the website, trade benefits include "..supporting more productive, higher paying jobs in our export sectors", "...expanding the variety of products for purchase by consumers and business", and "...encouraging investment and more rapid economic growth". This principle of economics most simply refers to how each country can specialize in one good based on which country has the lower opportunity cost. One country in a two good example is guaranteed to have either the same or one higher and one lower comparative advantage (this is based on opportunity cost). As shown, trade making everyone better off is a principle of economics that can be applied to real life situations.

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