4.1.2 Specialisation and trade Flashcards
1
Q
Absolute advantage
A
Occurs when a county can supply a product using fewer resources than another nation.
2
Q
Comparative advantage
A
Occurs when a country is able to produce a good more cheaply relative to other goods produced.
3
Q
Assumptions and limitations behind the theory of comparative advantage.
A
-There are no transport costs to get products to the market - high logistics costs may erode comparative advantage.
-No trade barriers such as tariffs and quotas which artificially change the prices at which trade occurs.
-Constant returns to scale i.e. no economies of scale which might amplify the the gains from trade.
4
Q
Advantages of specialisation and trade in a global context:
A
