Comparative advantage and the terms of trade

If there are differences in opportunity costs, then agents can benefit if they each specialize in producing the good that they have comparative advantage in, and then trading for a price that is between each agents opportunity costs. In this lesson, learn the intution and mechanics involved in determining comparative advantage, specialization, and trade.

Comparative advantage, specialization, and gains from trade

Comparative advantage and absolute advantage

Opportunity cost and comparative advantage using an output table

Comparative advantage and absolute advantage

Terms of trade and the gains from trade

Input approach to determining comparative advantage

When there aren't gains from trade

Comparative advantage worked example

The terms of trade