YEAR 2

Question 1

absolute advantage

Answer 1

The ability to produce a good more efficiently .

Question 2

comparative advantage

Answer 2

The ability to produce a good relatively more efficiently i.e. at a lower opportunity cost.

Question 3

law of comparative advantage

Answer 3

A theory arguing that there may be gains arising when countries (or individuals) specialise in the production of goods or services in which they have a comparative advantage.

Question 4

trading possibilities curve

Answer 4

A curve showing the consumption possiblities under conditions of free trade.

Question 5

terms of trade

Answer 5

The ratio of export prices to import prices.

Question 6

globalisation

Answer 6

A process by which the world’s economies are becoming more closely integrated.