Specialisation Flashcards
What will a nation specialise in?
What they are best suited at
What is done with surplus from domestic consumption?
Traded overseas
Why is self-sufficiency not widely used opposed to specialisation?
Impractical
Why is Brazil less well off despite having the same minerals as Australia?
High crime, poor institution, unsustainable population growth, bad income distribution
Absolute advantage
Producing a good more efficiently than another nation
Comparative advantage
Where country without absolute advantage has the smallest disadvantage
Terms of trade
Rate at which countries exchange different commodities
Effect of specialising and trading
Higher living standards, consumption outside PPF
How is comparative advantage measured?
Opportunity cost, ratios
What are relative advantages of specialisation over self-sufficiency?
Gains from increased consumption/living standards
Self sufficiency
Grow own food. Make own clothes/houses
Benefits and costs of comparative advantage
Relatively more efficient time wise, not necessarily able to overall produce more, greater output for shorter time
