Comparative Advantage and Trade

Opportunity cost

The cost of forgoing the next best alternative when making a decision.

Comparative advantage

The ability of a person or group to carry out a particular economic activity at a lower opportunity cost than another. lower opportunity cost

Absolute advantage

The ability of a party to produce more of a good or service with the same amount of resources than another party. More efficient

Barriers to trade

Government-imposed restrictions on the free exchange of goods and services between countries, including tariffs, quotas, and non-tariff barriers.

Advantages of globalization

Includes increased output, competition, a variety of goods, lower prices, and overall prosperity.

Arguments against globalization

Concerns include revenue generation from tariffs, unfair competition, and protecting emerging industries.

Infant industry argument

The belief that new industries should be protected from foreign competition until they become established.

Consumption tax

A tax imposed on the consumption of goods and services.

National security concerns

Concerns regarding the need to protect certain industries for the sake of a country’s safety and independence.

Tariffs

Taxes on imported goods, which can be used to generate revenue and protect domestic industries.

can someone have comparable advantage in tw goods

no

How open is the economy

imports and exports/gdp

calculating comparable advantage

good not produced/good produced

effects on immigrants on the labor market

short run; shift right on the supply curve, increase on the number of supplier, employment goes up wages go down

long run; increased demand