International trade and commercial policy Flashcards
1
Q
What does free trade do?
A
Maximise world income
2
Q
What is absolute advantage?
A
When an equal quantity of resources can produce more of good X in one country than another
3
Q
What is comparative advantage?
A
When one country can produce all commodities more efficiently than other countries
4
Q
What does international trade lead to?
A
Specialisation in production and increased consumption possibilities
5
Q
What is the terms of trade ratio?
A
Tt = Ep/Ip x 100
- Ep = export prices
- Ip = import prices
