Download The student will explain how voluntary trade benefits

SS7E6 The student will explain how voluntary trade benefits buyers and sellers in Southwest Asia
(Middle East)
A. Explain how specialization encourages trade between countries
• Every country cannot produce all the goods and services it needs.
• Therefore they specialize in producing those goods and services that they can provide most
efficiently.
• Then they sell their goods and services to other countries that need them.
• They use the profits from the sales to buy the things that they need.
• Specialization is that production of the things a country makes best that would be in demand in a
world market.
• Saudi Arabia specializes in oil while Israel specializes in agricultural technology.
B. Compare and contrast different types of trade barriers such as tariffs, quotas, and embargos.
• Trade barriers are anything that slows down or prevent one country from exchanging goods with
another country.
• Some barriers protect local industries while others are created due to political problems.
• Tariff- a tax placed on goods when they are imported into one country from another to make the
imported item more expensive that a similar item made locally.
• Protects local manufacturers from competition coming from cheaper goods made in other
countries.
• Quota- limits the amounts of foreign goods that can come into a country.
• Sets a specific number or amount of a particular product that can be imported or acquired in a
given period of time.
• A protective measure that makes it more likely that people will buy locally made products.
• Embargo- One country announces that it will no longer trade with another country in order to
isolate the country and cause problems with that country’s economy.
• Used as a political tool.
• Usually as a result of political disputes between two countries.
• Can hurt both countries.
C. Explain the primary function of the Organization of Petroleum Exporting Countries (OPEC)
• Formed in 1960 by Iraq, Iran, Saudi Arabia, Kuwait, and Venezuela.
• They decide how much oil to produce and sell and they decide the price of a barrel of oil.
• When they produce less, the price goes up. When they produce more, the price goes down.
D. Explain why international trade requires a system for exchanging currencies between nations.
• Most countries have their own type of currency (money).
• In order to trade with one another, a system of exchanging one type of money for another had to
be created.
• This system is called an exchange rate
• There are many different types of currencies world wide and the exchange rate gives you the
value of each.
• Philippines = peso; Honduras = lempira; Cameroon = Central African franc; India = Rupee
Can you answer these questions?
• 1. What is economic specialization?
• 2. In what 2 products does Saudi Arabia specialize?
• 3. In what does Israel specialize?
• 4. What does a trade barrier do?
• 5. What is a tariff?
• 6. What is a quota?
• 7. What is an embargo?
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8. Which 2 are protective measures?
9. Why is an embargo used?
10. Why was OPEC created?
11. What happens to the price of oil when OPEC decides to limit oil production?
12. Where are most of the OPEC countries located?
13. Why is it important for nations to have a system to convert from one currency to another?