law of comparative advantage Flashcards
1
Q
what is comparative advantage and absolute advantage
A
-absolute: when a country can produce a product using fewer factors of production
-comparitive: a country should specialise in the goods and services at the lowest opportunity cost and then trade with another country
2
Q
equation
A
-divide both sides by the thing you wanted to check
-giving up lower
3
Q
how to check comp advantage on graph
A
-go to axis with biggest gap and country with highest has comp advantage
4
Q
what determines whether a country has comparative advantage
A
the quantity or quality of their factors of production
