Trade, welfare and inequalities

Explain with a playground example (swapping stickers, sandwiches, or study notes) why two people exchange things voluntarily. What condition must be met for both to benefit?

The diagram shows an exchange between two town neighbours: Ana has oranges from her orchard and Biel bakes bread. They swap $4$ kg of oranges for $2$ loaves of bread.

1. a) Explain why Ana and Biel accept the exchange without anyone forcing them.
2. b) Imagine that Biel only wants oranges if he is given $6$ kg per loaf. What would happen to the exchange? What role does the agreed 'price' play?

Explain what barter is and what two difficulties it has (finding someone who wants exactly what you offer, agreeing how much each thing is worth). Illustrate it with a sticker swap that went wrong.

Money solves the problems of barter. Name its three functions — medium of exchange, unit of account (measuring value) and store of value (keeping it for later) — and identify which one is used in each case: (a) you compare the price of two hoodies; (b) you pay for the bus; (c) you keep $15\ \text{€}$ in your money box for December.

Explain what specialisation is with an example from school: at the end-of-year party, each class prepares one thing (food, music, decoration) instead of every class doing everything. What is gained and what is lost by specialising?

Marta takes $10$ minutes to make a bracelet and $20$ to make a keyring; Leo takes $20$ minutes per bracelet and $15$ per keyring. Each of them has $60$ minutes available.

1. a) Calculate how many bracelets and how many keyrings each person can make if they devote all their time to a single product.
2. b) If they specialise (each working only on what they can do faster) and then trade, explain why together they produce more than if each worked individually.

In one hour, Aina can prepare $6$ sandwiches or $4$ fruit trays; Enzo can prepare $3$ sandwiches or $3$ trays.

1. a) Calculate the opportunity cost of each person per product (how many trays a sandwich costs Aina, and vice versa).
2. b) Determine who has the comparative advantage in each product and explain why, even though Aina is better at everything, it pays both of them to specialise and trade.

At the local market, Mei sells homemade jam at $4\ \text{€}$ per jar. A customer would have bought it even if it cost $6\ \text{€}$, and Mei would have sold it even if she was paid $3\ \text{€}$. Explain what each person gains from this deal, what this gain is called, and what would happen if the price rose to $5,50\ \text{€}$.

The neighbourhood greengrocer's charges $2\ \text{€}$ for a kilo of tomatoes. The greengrocer would have been willing to sell them at $1,50\ \text{€}$ and one customer would have paid up to $2,80\ \text{€}$.

1. a) Calculate the producer surplus and the consumer surplus in that exchange and explain what each one measures.
2. b) Explain what happens to that total surplus if the council forces the kilo to be sold at $1\ \text{€}$ and the greengrocer decides to bring fewer tomatoes.

Explain in your own words what inequality is and distinguish income inequality (what is earned) from wealth inequality (what has been accumulated). Give an example of each between two fictional families from the same neighbourhood.

In Iker's neighbourhood, there are three families with very different incomes: a couple of doctors, a family with two supermarket wages, and a grandmother with a small pension. Explain what economic inequality is, name two causes that create it, and one consequence it can have on the projects that each family can afford to undertake.

In an economic panel discussion, an analyst states: "If two people or two countries trade voluntarily, it is impossible for inequality to increase, since both are better off compared to their initial situation; therefore, trade is always fair and benefits everyone equally."

1. a) Refute the statement by demonstrating with a specific example how an exchange in which both parties gain can, at the same time, trigger soaring economic inequality between them. In your response, analyze the distribution of surplus and asymmetry in bargaining power.
2. b) Predict what economic consequences a group or region lacking productive resources, technology, or skills to participate in global trade exchanges will suffer, and justify why free trade can worsen their situation of exclusion.