Economics 1022A/B Chapter Notes - Chapter 31: Trade Route, Comparative Advantage, Fundamental Interaction

• School: Western University
• Department: Economics
• Course: Economics 1022A/B
• Professor: Emilie Mc Hugh Rivers

Document Summary

Imports: the goods and services that we buy from other countries. Exports: the goods and services that we sell to people in other countries. Comparative advantage is the fundamental force that drives international trade. Comparative advantage: situation in which a person can perform an activity or produce a good or service at a lower opportunity cost than anyone else. National comparative advantage: situation in which a nation can perform an activity or produce a good or service at a lower opportunity cost than any other nation. People of different countries can gain from specialization and trade. Through international trade, countries can get higher prices for their produce. When a country freely imports from the rest of the world, it is because the rest of the world has a comparative advantage at producing some things. If no international trade, the price paid by the consumer is higher and the quantity consumed decreases.