Individual: exists when a person can produce more of a certain good/ service that someone else in the same amount of time (or can produce a good using the least amount of resources)
National: exists when a country can produce more of a good/ service than another country can in the same period of time.
Comparative Advantage
Person or nation has a comparative advantage in the production of a product when it can produce the product at a lower domestic opportunity cost than a trading partner
- Input:
- ex. TVs produced per hour, miles per gallon
- Output:
- ex. number of hours to do jobs, number of acres to feed horses
Specialization and Trade
Gains from trade are based on comparative advantage, not absolute advantage.
- countries should trade if they have a lower opportunity cost
Good notes, i like the different colors you use, i think your examples are very helpful, i makes it easier to understand.
ReplyDeleteBalance of trade is a little bit interesting because it says balance but it is when it is producing more
ReplyDelete