Introduction to Economics: Trade and Comparative Advantage

These flashcards cover key concepts related to trade, production possibilities, and comparative advantage as discussed in the lecture.

What is the production possibility?

The maximum amount of two goods or two services that an economy can produce, given resources and technology.

What does economic growth refer to in the context of production possibilities?

The ability to produce more goods and services due to an increase in resources and/or improvements in technology.

What is the difference between absolute advantage and comparative advantage?

Absolute advantage refers to needing fewer inputs to produce a certain amount of output, while comparative advantage refers to producing something at the lowest opportunity cost.

How can trade benefit economies according to the lecture?

Trade increases the availability of goods and services, leading to greater consumption opportunities for countries.

What are the potential downsides of trade?

Trade can negatively impact competitive domestic businesses, leading to job losses in certain industries.

Why is comparative advantage important in trade?

Comparative advantage determines which goods countries should specialize in producing, thus benefiting from trade.

What are the factors that can lead to an outward shift in production possibilities?

Increasing resources or improving technology.

What is the 'gains from trade'?

The concept that countries can obtain more goods and services through trade than they could if they were self-sufficient.

What can lead to a trade surplus or deficit?

A trade surplus occurs when a country exports more than it imports, while a deficit happens when imports exceed exports.

What does it mean for a country to have a comparative advantage in a service like education?

It means the country can provide that service at a lower opportunity cost compared to others, making it competitive in exporting that service.

What is the production possibility?

The maximum amount of two goods or two services that an economy can produce, given resources and technology.

What does economic growth refer to in the context of production possibilities?

The ability to produce more goods and services due to an increase in resources and/or improvements in technology.

What is the difference between absolute advantage and comparative advantage?

Absolute advantage refers to needing fewer inputs to produce a certain amount of output, while comparative advantage refers to producing something at the lowest opportunity cost.

How can trade benefit economies according to the lecture?

Trade increases the availability of goods and services, leading to greater consumption opportunities for countries.

What are the potential downsides of trade?

Trade can negatively impact competitive domestic businesses, leading to job losses in certain industries.

Why is comparative advantage important in trade?

Comparative advantage determines which goods countries should specialize in producing, thus benefiting from trade.

What are the factors that can lead to an outward shift in production possibilities?

Increasing resources or improving technology.

What is the 'gains from trade'?

The concept that countries can obtain more goods and services through trade than they could if they were self-sufficient.

What can lead to a trade surplus or deficit?

A trade surplus occurs when a country exports more than it imports, while a deficit happens when imports exceed exports.

What does it mean for a country to have a comparative advantage in a service like education?

It means the country can provide that service at a lower opportunity cost compared to others, making it competitive in exporting that service.

What is scarcity?

The fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources.

What are economic models used for?

Simplified representations of reality used to understand and predict economic phenomena.

What is microeconomics?

The branch of economics that studies how individuals, households, and firms make decisions in specific markets.

What is macroeconomics?

The branch of economics that studies the economy as a whole, including topics like inflation, unemployment, and economic growth.

What does a point inside the Production Possibility Frontier (PPF) curve represent?

Inefficient production, meaning resources are not being fully utilized or are being wasted.

What does a point outside the Production Possibility Frontier (PPF) curve represent?

An unattainable level of production with current resources and technology.

What does a point on the Production Possibility Frontier (PPF) curve represent?

Efficient production, where resources are fully employed and utilized to their maximum potential.

What does the downward slope of the Production Possibility Frontier (PPF) reflect?

The concept of opportunity cost, as producing more of one good requires producing less of another.