Essential Question

How do economic factors influence the Middle East?

SS7E6a. Explain how specialization

encourages trade between countries. SS7E6b. Compare and contrast

different types of trade barriers, such as tariffs, quotas, and embargos.

SS7E7a. Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP).

Standards

SS7E7b. Explain the relationship between

investment in capital (factories, machinery, and technology) and gross domestic product (GDP).

SS7E7c. Explain the role of oil in these countries’ economies.

SS7E7d. Describe the role of entrepreneurship.

SS7G8e. Evaluate how the literacy rate affects the standard of living.

Standards

Factors of Trade and Economic

Growth ActivityAfter the Factors of Trade and Economic Growth Activity, use the remaining slides to review economic factors that affect

Southwest Asia.

Countries specialize in what they

do best.

Specialization

http://www.econedlink.org/interactives/index.php?iid=185

Specialization increases trade because a country can get what it needs at the lowest cost when

produced by someone who specializes in producing that

item.

SpecializationFactor Group 3

 

Saudi Arabia, Iran, Iraq, and Kuwait export millions of barrels of oil every day.

The U.S. exports food, medicine, and raw materials to Middle Eastern countries.

Israel imports rough diamonds and exports the finished product: cut and polished diamonds.

The United States imports oil from the Middle East because it does not have enough oil for the country’s needs.

In the past, Iran has made some efforts to export goods other than oil, but its prices were too high to be competitive

Specialization

Factors of Trade &

Economic Growth

Iran Israel Saudi Arabia

Specializes to increase

trade

   

Iran exports millions of

barrels of oil every day.

Israel imports rough

diamonds and exports the

finished product: cut and polished

diamonds

Saudi Arabia exports

millions of barrels of oil every day.

Turn to an elbow partner and describe how Iran, Israel, and

Saudi Arabia specialize to increase trade.

Countries sometimes set up trade

barriers to restrict trade because they want to sell and produce their own goods

Tariff: a tax placed on imported goods

Quota: a restriction on the amount of a good that can be imported

Embargo: trade is forbidden with another country

Trade Barriers

TRADE BARRIERS

Tariffs: higher price on imports = lower demand on imports = higher

demand on domestic goods

TRADE BARRIERS

Quotas: “supply shortage” = higher price on imports = higher demand on domestic goods

TRADE BARRIERSEmbargoes: NO trade at all!

Trade BarriersFactor Group 2

 

In the past two decades, the United States has had several embargoes against Iran because of Iran’s involvement with terrorism.

When Saudi Arabia wanted to join the World Trade Organization (WTO), it lifted its long-standing embargo against all trade with Israel.

The Free Trade Agreement (FTA) signed by the United States and Israel eliminated all duties and other restrictions on trade in goods between the two countries.

Trade Barriers

Factors of Trade &

Economic Growth

Iran Israel Saudi Arabia

Effected by Trade

Barriers

     

The U.S. has had several

embargoes against Iran

because of Iran’s involvement with

terrorism.

For years, Saudi Arabia had an

embargo against all trade with

Israel.

A trade agreement was signed by the U.S. and Israel that eliminated restrictions on

tradebetween the

countries.

Turn to an elbow partner to discuss which of the three

countries was affected positively by the

presence or absence of a trade barrier. Why?

Human Capital:

Education and training

Investments in Human Capital

Education and the abilities it

develops create a smarter and more productive workforce, which leads

to greater economic growth.

Investments in Human Capital

Investment in Human CapitalFactor Group 4

 

Israel has highly educated workers and a large number of scientists and engineers.

Iran has high unemployment because young Iranians have not been trained to do jobs.

Saudi Arabia is in the early stages of revising its entire education system.

The educational system in Iran is weak and many educated Iranians are seeking work in other countries.

Israel invests in its schools and has a literacy rate of 97%, the highest in the Middle East.

For the past several decades, Saudi Arabia has sent university students abroad for education.

Iran has begun to raise the priority of education and adult literacy by building new schools and expanding public colleges.

Investment in Human Capital

Factors of Trade &

Economic Growth

Iran Israel Saudi Arabia

Makes Investment

sin Human

Capital

     

High unemployment due to lack of

training; a weak education

system; it has started to raise the priority of education and

literacy

Has highly educated workers; invests in

schools; has the highest literacy rate

among Middle East countries

(97%)

Is revising its education

system; has sent university

students abroad to study

Think, Pair, ShareExamine the table below. In

which country would you most prefer to live? Why? Least

prefer? Why?Country Literacy

GDP per capita (person)

LifeExpectanc

y

Unemployment Rate

Afghanistan 38% $2,000 51 35%

Iran 87% $16,500 71 23%

Israel 98% $33,400 82 12%

Lebanon 94% $17,900 77 17%

Saudi Arabia 95% $52,800 75 28%

There is a relationship between literacy and human

capital in terms of people’s ability to produce income and have a better life.

Country LiteracyGDP per capita

(person)Life

ExpectancyUnemployment

Rate

Afghanistan 38% $2,000 51 35%

Iran 87% $16,500 71 23%

Israel 98% $33,400 82 12%

Lebanon 94% $17,900 77 17%

Saudi Arabia 95% $52,800 75 28%

Based on current data taken from the CIA World Factbook in 2015

Human Capital, Literacy Rate, and Standard of

LivingIf you can read, you can learn. If you can learn, you can improve your work skills, and get a better job that pays a better

salary. If you have a better salary, you can improve your standard of living.

A country that improves the literacy rate among its citizens will improve the

standard of living within that country and improve its economy. Educated and skilled

workers are an important factor in a country’s economic growth.

Capital: Factories, Machinery, Technology,

Roads, Equipment, etc.

Investment in Capital

Investment in capital helps economic growth by providing workers with the best and newest tools which

makes them more productive, and increases a country’s GDP.

Investment in CapitalFactor Group 1

 

Israel has a modern, well developed infrastructure and continues to upgrade it by investing in services like mass transit (transportation) systems and new highways.

Saudi Arabia is planning a massive, multi-billion-dollar investment in a railway project that will move shipments to and from its ports faster.

While Iran has generous oil reserves, it does not produce as much oil as it could because the country invests only a small percentage of its oil profits into improving oil facilities and the country’s infrastructure (organization).

Saudi Arabia has built factories and increased spending on the development of infrastructure (organization).

Iran has started to invest in its telecommunications networks, roads, and machinery.

Investment in Capital

Factors of Trade &

Economic Growth

Iran Israel Saudi Arabia

Makes Investments in Capital

     

Invests only a small % of oil profits into improving

facilities and organization; has started to invest

in telecommunicati

on systems, roads, and machinery

Has modern, well-developed infrastructure (organization)

and improves it by investing in transit systems

and new highways

Is planning a huge investment

in a railway system to move

shipments to ports faster; has

built factories and increased spending for

infrastructure (organization)

Turn to an elbow partner to discuss which of the three

countries has made the most improvement in

the investment of capital (human and

physical). Why?

Natural resources are

materials or substances that occur in nature and can be

used for economic gain.

Natural Resources

Natural resources are the fuel for industry and a source of income when exported to

other countries.

Natural ResourcesFactor Group 7

 

Saudi Arabia’s economy is anchored in oil. Money from oil transformed Saudi Arabia from a poor society to a very wealthy society.

Oil is what keeps the economy and GDP of Iran growing, providing the majority of government revenues.

Despite being in the otherwise oil-rich Middle East, Israel is low on natural resources. The country's economic stability is largely due to its advanced high-tech region and agriculture, rather than its production of raw materials.

Natural Resources

Factors of Trade &

Economic Growth

Iran Israel Saudi Arabia

Presence of natural resources

     

Oil provides the majority of revenue

(money). This could be

considered a negative too.

Why?

Saudi Arabia’s economy is

dependent on oil. This could be considered

a negative too. Why?

Israel is low on natural resources

(but its economy is successful

because of its investment in

capital and high-tech

industries)

Entrepreneur: someone who has an idea for a good or service and takes the risks to produce it. They use human, capital, and natural resources to produce their

product.

Entrepreneurship creates jobs and better materials, products, technologies, etc.

The more entrepreneurs a country has, the higher the country’s GDP

EntrepreneurshipFactor Group 5

 

Israel’s policies, including its tax structure, encourage the growth of small businesses.

To start a new business or develop a new product, people in Iran have to overcome many obstacles like getting credit from a bank.

Saudi Arabia has cut down the government requirements to start a business.

Israel has a Technological Incubator Program for people in order to promote the development of innovative technology.

Israel has programs to train immigrants, Arab-Israelis, and people over 55 to start their own business.

Since there is little training available in Iran, new business owners have a difficult time hiring good managers.

International investors have started an institute in Saudi Arabia to support new business owners and give them a place to start a business.

Entrepreneurship

Factors of Trade &Economic Growth Iran Israel Saudi Arabia

Encourages Entrepreneurs

hip

     

Policies encourage the growth of small

business; it promotes the

development of innovative

technology; has training

programs for people starting a

new business

Has cut down government

requirements to start a

business; has an institute to support new

business owners

Entrepreneurship is growing, but people have to overcome many

obstacles to start a new business; there are new

gov’t programs supporting

entrepreneurship, but still little

training

Economic growth in a country is

measured by the country’s Gross Domestic

Product (GDP) in one year

Gross Domestic Product (GDP)

GDP = the total of goods and

services produced in one year within a country

Gross Domestic Product (GDP)

GDP per capita is a measure of the total output of a country that takes the GDP and divides it by

the number of people in the country.

Economic growth is usually measured by calculating the percent increase in GDP from one year to the next. This is

known as the GDP Growth Rate.

GDP per capita and GDP growth rate can be useful when comparing one

country to another because it shows the relative performance of the

countries.

GDP Review Videos [select one]

Gross Domestic Produce: The Economic Lowdown

[7:51]

What Exactly is GDP? [from economics unit]

Get with a seat partner. Each

partner should share a 1-2 sentence

explanation of GDP.

Gross Domestic Product (GDP)Factor Group 6

 

The average Israeli citizen makes $33,400 The average Iranian citizen makes $16,500 The average Saudi citizen makes $52,800 The real growth rate for Israel in 2014 was 2.5% The real growth rate for Iran in 2014 was 1.5% The real growth rate for Saudi Arabia in 2014 was

3.6%

Gross Domestic Product (GDP)

Factors of Trade &

Economic Growth

Iran Israel Saudi Arabia

GDP Per Capita & GDP Growth Rate

     

GDP Per Capita: $16,500

GDP Growth Rate: 1.5%

GDP Per Capita: $33,400

GDP Growth Rate: 2.5%

GDP Per Capita: $52,800

GDP Growth Rate: 3.6%

Based on current data taken from the CIA World Factbook in 2015

Based on GDP per capita and growth rate, which country has the strongest economy? Why?

Weakest? Why?Factors of Trade

&Economic Growth

Iran Israel Saudi Arabia

GDP Per Capita & GDP Growth Rate

     

GDP Per Capita: $16,500

GDP Growth Rate: 1.5%

GDP Per Capita: $33,400

GDP Growth Rate: 2.5%

GDP Per Capita: $52,800

GDP Growth Rate: 3.6%

Based on current data taken from the CIA World Factbook in 2015

Use the Index of Economic

Freedom to compare the three countries of Southwest (Middle

East) to the U.S.

Economic Factors

http://www.heritage.org/index/ranking

Think, Pair, Share:Answer the four questions from the

Factors of Trade & Economic Growth Activity

1. Based on all economic factors, which country do you think has the strongest economy? Why?

2. Based on all economic factors, which country do you think has the weakest economy? Why?

3. What could Iran do to increase its GDP Per Capita and GDP Growth Rate? Why?

4. Which factor of trade and economic growth do you think is the most important? Why?

Summarizer