Chapter 2: The Power of Trade and Comparative Advantage

Vocabulary flashcards covering core economic terms from Chapter 2, such as trade, comparative advantage, absolute advantage, division of knowledge, and the production possibilities frontier.

Absolute Advantage

The ability of a country or producer to produce the same good using fewer inputs than another country or producer.

Comparative Advantage

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

Production Possibility Frontier (PPF)

A graph or model showing all the combinations of goods that a country can produce given its productivity and supply of inputs.

Opportunity Cost

The value of the opportunities lost when making a choice.

Division of Knowledge

The distribution of specialized knowledge across many individuals in a society, enabling the total knowledge used in an economy to far exceed what a single human brain can hold.

Trade

The exchange of goods and services that creates value by moving goods from people who value them less to people who value them more.

Globalization

The advance of human cooperation across national boundaries.

"North" (in international economics)

A shorthand term used in international economics to denote the high-tech developed countries of East Asia, North America, and Western Europe.

"South" (in international economics)

A shorthand term used in international economics to denote the rest of the world outside of high-tech developed regions.