Comparative Advantage and Trade

These flashcards cover key concepts from the lecture on comparative advantage and trade, such as division of labor, opportunity cost, and the significance of specialization in economics.

Comparative Advantage

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

Division of Labor

The separation of tasks in production to improve efficiency by assigning different tasks to different people.

Division of Knowledge

The separation of specialized knowledge across different individuals to enhance productivity and efficiency.

Production Possibilities Frontier (PPF)

A curve that outlines all possible combinations of total output that could be produced given fixed resources and technology.

Opportunity Cost

The value of the next best alternative foregone when making a choice.

Absolute Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.

Specialization

The process of concentrating on a limited number of activities to enhance productivity and efficiency.

Beneficial Rate of Exchange

The range of trade values at which both parties benefit from the exchange.

Gains from Trade

The increased output and benefits that occur from trading rather than producing everything independently.

Shifting the PPF

The process by which the production possibilities frontier moves due to changes in resources, technology, or production methods.