International trade: exchange of goods and services between countries
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Benefits of international trade:
Prices may be lower in some countries because they have access to natural resources, quality of labour, quality in capital, different tech levels
Greater choice: consumers have access to domestic and international products
Increased competition
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Economies of scale:
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Absolute advantage: ability of an individual, company, region, or country to produce a greater quantity of a good or service with the same quantity of inputs per unit of time
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Comparative advantage: which goods should a country produce for export and which should it import
Limitations to production:
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Factors of production remain in the country
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Despite the limitations, comparative advantage is at the core of international theory
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Dumping
Specialisation
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Absolute Advantage vs. Comparative Advantage
A country has this in the production of a good if it can produce it using fewer resources than another country
Shows which country specializes in what kind of product compared to another country for the same product
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Comparative Advantage
A country has this in the production of a good if it can produce the good at a lower opportunity cost than another country
Country with the higher opportunity cost should specialize in the product compared to another country for the same product
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