Vocabualry

Absolute Advantage

When a nation, business, or individual can produce a good or service more efficiently than another entity.

 

Comparative Advantage

When a nation has a lower opportunity cost than another nation.

 

Terms of Trade

The price of a good or service that must be given up to obtain another good or service.

 

Specialization

When a person or country uses the available resources to make a certain good with the idea of trading that good for other goods or services.

 

Opportunity Cost

The value of what is given up when one activity is chosen over another.