Countries seek to maximize their limited resources by specializing in goods and services they have a comparative advantage in producing over trading partners. Comparative advantage allows a country to produce a good at a lower opportunity cost than other countries. When countries specialize based on their comparative advantages and trade, total world production increases as nations focus on producing the goods they are most efficient in making. Comparative advantage is the primary motivating factor for international trade as it leads to gains from specialization and trade.

1. EPF9 The student will demonstrate knowledge of the
global economy

2. Absolute and Comparative
Advantages in International Trading
 Countries seek to maximize the use of their limited
resources

4. Absolute vs. Comparative
Absolute Advantage
 An individual, business, or country that can produce a
certain good with fewer resources than other
countries is said to have an absolute advantage.
Comparative Advantage
 An individual, business, or country that can produce a
certain good at a lower opportunity cost than its
trading partners is said to have a comparative advantage.

6. Specialization
When an individual, business, or country focuses its
resources on producing a few goods or services
and expects to trade for other goods and services it
wants.

8. Affects of Comparative Advantage
Trading
Total world production is greater when nations
specialize in the production of those products that
they can produce most efficiently.

10. Primary Motivating Factor for
International Trade
 Comparative advantage is the primary motivating
factor driving international trade.