6.1 The reasons for international trade Flashcards
Define the term “Factor endowment”
The availability of capital, enterprise, labor, and land in an economy.
Define the term “Absolute advantage”
A situation where, for a given set of resources, one country can produce more of a particular product than another country.
Define the term “Opportunity cost ratio”
The quantity of one product compared to the quantity of another product that has to be sacrificed to produce it.
Define the term “Comparative advantage”
A situation where a country can produce a product at a lower opportunity cost than another country.
Define the term “Free trade”
International trade not restricted by taxes on imports and other policy tools designed to give domestic producers protection from competition from imports.
Define the term “Trading possibility curve”
A diagram showing the effects of a country specializing and trading.
Define the term “Imports”
Goods and services purchased from other countries.
Define the term “Exports”
Goods and services sold to other countries.
Define the term “Terms of trade”
A numerical measure of the relationship between export and import prices.
