ECON 1010 Chapter Notes - Chapter 3: Absolute Advantage, Comparative Advantage, Opportunity Cost
Document Summary
The ability to produce a good using fewer inputs than another producer. The ability to produce a good at a lower opportunity cost than another producer. Specializing in a good while another economy specializes in another good to allow productive trade for both parties. The gains from specialization and trade are based on comparative advantage and not absolute advantage. While it is possible for someone to have absolute advantage in both goods, it is impossible for someone to have a comparative advantage in both goods. For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs. *with trade, an economy can expand its ppf*
