ECON 2100 Lecture Notes - Lecture 4: Absolute Advantage, Comparative Advantage, Opportunity Cost
Document Summary
Different countries (or people) have different costs of production or different abilities to produce goods. Taking advantage of these differences by trading goods will make both countries better off. We call these benefits gains from trade. We say that a country has absolute advantage in the production of an output when. They can produce more output with the same amounts of inputs or. They can produce the same output with fewer inputs. The united states has absolute advantage in the production of many goods. To produce clothing, the us has to give up more of some other output, like semiconductors. To produce clothing, bangladesh has to give up few semiconductors. Bangladesh has the lowest opportunity cost in clothing production.
