International economics

Table of Contents

1. Topic pack - International economics - introduction
2. Section 3.1 International trade (notes)
   1. Reasons for trade - introduction
   2. Benefits of trade
   3. Absolute advantage
   4. Comparative advantage
   5. Absolute and comparative advantage (video)
   6. World Trade Organisation (WTO)
   7. The role of the WTO
   8. WTO background information
   9. Trade protection - introduction
   10. Introduction to trade policies (video)
   11. Types of protectionism
   12. Tariffs - case study
   13. Imposing a tariff - calculation
   14. Setting a quota - calculation
   15. Giving a subsidy - calculation
   16. Arguments for protectionism
   17. Arguments against protectionism
3. Section 3.1 International trade (questions)
4. Section 3.1 International trade - simulations and activities
5. Section 3.2 Exchange rates (notes)
6. Section 3.2 Exchange rates - questions
7. Section 3.2 Exchange rates - simulations and activities
8. Section 3.3 Balance of payments - notes
9. Section 3.3 Balance of payments - questions
10. Section 3.4 Economic integration - notes
11. Section 3.4 Economic integration - questions
12. Section 3.5 Terms of trade - notes
13. Section 3.5 Terms of trade - questions
14. Print View

Absolute advantage - Higher Level Only

Syllabus: (You need to be able to)

• Explain the theory of absolute advantage.
• Explain, using a diagram, the gains from trade arising from a country’s absolute advantage in the production of a good.

Definition: An absolute advantage occurs when one person, company, or country is more efficient at producing the same good or service than another person, company or country.  If Mark can cut four lawns in an hour and Susan can cut five lawns in an hour, then Susan has an absolute advantage in lawn cutting - Good old Susan NB Alternative definition: Absolute advantage exists when a country can produce more of a product per resource unit than another country.

Learning Tip: Really understand this definition because it is so easy to confuse this with the definition of comparative advantage

Trade allows a country to specialise in the production of those products that it can produce most efficiently.

A country will benefit from international trade if it exports those goods it is more efficient at producing and imports (exchanges) those goods it is not so efficient at producing (see benefits of trade)