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.
5.
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.
7.
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.
9.
10. Primary Motivating Factor for
International Trade
Comparative advantage is the primary motivating
factor driving international trade.
