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PPF - Comparative Advantage and Trade definitions

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  • Comparative Advantage
    Lower opportunity cost in producing a good compared to others, enabling more efficient specialization and trade.
  • Absolute Advantage
    Ability to produce more of a good with the same resources than another economy, regardless of opportunity cost.
  • Specialization
    Concentration of resources on a limited range of goods to maximize efficiency and output.
  • Trade
    Exchange of goods between economies, allowing access to a wider variety of products than produced alone.
  • Opportunity Cost
    Value of the next best alternative forgone when choosing to produce one good over another.
  • Production Possibility Frontier
    Curve showing the maximum combinations of goods an economy can produce with available resources.
  • Consumption Possibilities
    Range of goods an economy can consume, which expands beyond its production limits through trade.
  • Aggregate Supply
    Total output of goods available in an economy, which can increase with efficient specialization and trade.
  • Resource Allocation
    Distribution of inputs among different uses to maximize output and efficiency.
  • Efficiency
    Optimal use of resources to achieve the highest possible output with minimal waste.
  • International Trade
    Exchange of goods and services across national borders, driven by differences in comparative advantage.
  • Output
    Total quantity of goods produced by an economy, which can rise with specialization and trade.
  • Market
    System or environment where buyers and sellers interact to exchange goods and services.
  • Goods
    Physical items produced and exchanged in an economy, such as ravioli, pierogi, or wine.
  • Economy
    System of production, distribution, and consumption of goods and services within a region or country.