Specialization
-when a country focuses on producing a product that they have a comparative advantage in
-Adam Smith observed that specialization and trade increase the productivity of a nation's resources
-When one country can make a good at a lower opportunity cost than another country, it has a comparative advantage in producing that good.
-Whenever a country has a comparative advantage over another country, both countries will benefit from trade.
Absolute Advantage
-When a country can make more of a product than another country with the same resources, that country has an absolute advantage
Terms of Trade
-limited by relative costs of production within each country
No comments:
Post a Comment