Chapter 3: Interdependence and Gains from Trade Flashcards
Exports are
goods and services produced in a country and sold to the rest of the world
Imports are
goods and services produced in the rest of the world and brought into a country
productivity can be measured by
how much output a worker can produce
there are two ways to compare the productivity of 2 workers
who is produces more or who takes less time to produce 1 unit
an individual who is more productive over someone else has the _____________________ over the other
Absolute advantage
The Terms of Trade can also be described as
the price of trade and the gains from trade
to ensure both parties gain from trade..
the price they choose to trade with each other must be between the opportunity cost
he/she is going to specialize in the product they have comparative advantage….this is referred to as
pattern of specialization
the extra product he/she has from the product they specialize in will be exchanged … this is known as
pattern of trade
when a party involved in trade increases their prices, their will be an increase in their gains, the other person will be paying more and see their gains decreasing…this is known as
gains in trade
the comparison among producers of a good according to their opportunity cost
comparative advantage
gains in trade are based on
comparative advantage
