Interdependence and the Gains from Trade

These flashcards cover key economic concepts related to interdependence, trade, and the benefits derived from economic interaction between nations.

Interdependence

The reliance between countries or people for goods, services, and resources.

Absolute Advantage

The ability to produce a good using fewer inputs than another producer.

Comparative Advantage

The ability to produce a good at a lower opportunity cost than another producer.

Opportunity Cost

The value of the next best alternative that must be forgone when making a choice.

Gains from Trade

The increased output and benefits that countries achieve by specializing in the production of goods where they have a comparative advantage.

Exports

Goods produced domestically and sold abroad.

Imports

Goods produced abroad and sold domestically.

Production Possibility Frontier (PPF)

A curve that depicts all maximum output possibilities for two goods, given a fixed amount of resources.

Self-Sufficiency

The condition of not relying on others for goods or services; producing everything one needs.

Economic Pie

A metaphor for the total wealth produced by an economy; can increase when countries trade.