International Trade: Why Countries Trade & What They Trade

This set of flashcards covers key vocabulary terms related to international trade, focusing on the concepts of comparative and absolute advantage, trade theory, and the factors influencing trade patterns.

Comparative Advantage

The ability of a country or firm to produce a good or service at a lower opportunity cost than others.

Absolute Advantage

The ability of a country or firm to produce more of a good or service than competitors using the same amount of resources.

Heckscher-Ohlin Trade Theory

A theory that explains national comparative advantage and trading patterns based on a country's factor endowments.

Factor Endowment

The resources and factors of production that a country possesses, which determine its comparative advantage.

Specialization

The process of focusing resources on the production of a limited range of goods to gain greater efficiency.

Division of Labor

The separation of tasks in a system so that each worker can specialize in a specific task.

Productivity

The measure of the efficiency of production, calculated as the ratio of outputs to inputs.

Economic Growth

The increase in a country's output of goods and services over time, often measured as the increase in Gross Domestic Product (GDP).

Labor-intensive Goods

Products that require a large amount of labor to produce, such as clothing and toys.

Capital-intensive Goods

Products that require significant investment in machinery and equipment for their production.