Flashcards in Specialisation And Trade Deck (5)
What is absolute advantage?
When one country can produce a good with fewer resources than another
What is comparative advantage?
A country has a comparative advantage if it can produce a good at a lower opportunity cost
The law of comparative advantage
This states that trade can benefit all countries if they specialise in goods in which they have a comparative advantage
If India has a lower opportunity cost than the Uk who has the comparative advantages