Trade

comparative advantage (ch. 2)

A producer has a comparative advantage over another in the production of a good or service if he or she can produce that product at a lower opportunity cost.

absolute advantage (ch. 2)

A producer has an absolute advantage over another in the production of a good or service if he or she can produce that product using fewer resources (a lower absolute cost per unit)

consumer goods

Goods produced for present consumption

theory of comparative advantage (ch. 2)

Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be "absolutely" more efficient producers.

theory of comparative advantage (ch. 19)

Ricardo's theory that specialization and free-trade will benefit all trading partners (real wages will rise), even those that may be absolutely less efficient producers.

absolute advantage (ch. 19)

The advantage in the production of a good enjoyed by one country over another when it uses fewer resources to produce that good than the other country does.

comparative advantage (ch. 19)

The advantage in the production of a good enjoyed by one country over another when that good can be produced at a lower cost in terms of other goods than it could be by another country.

factor endowments

The quantity and quality of labor, land, and natural resources of a country.

terms of trade

The ratio at which a which a country can trade domestic products for imported products.

exchange rate

The ratio at which two currencies are traded. The price of one currency in terms of another.

trade surplus

The situation where a country exports more than it imports.

trade deficit

The situation where a country imports more than it exports.