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Summary IB ECONOMICS HL - Cheat sheet for comparative and absolute advantages
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Hand-written and detailed summary notes for the topics of comparative and absolute advantage in IBDP Economics
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↑ bisolute drainage3
A has
country an ABSOLUTE ADVANTAGE In a
good when using the
,
same amount
of resources
,
It can
produce
than another
more
of the
good country
.
B's As
good A PPC
-
:
Since
Country PPC extends further to the
right (for good B) than Country
↳ absolute advantage
Country B has good B an in
- Country As PPC If country (goodA)
A &
Country /goodB) agree to specialise
B in +
export
· E the
good that
they have an absolute
advantage in . A can
exchange their
· F
excess
good A
fre B's excess
good B & vica versa
.
B's
Country producing
PPC While both countries their PPCs
they
:. are on can
,
now consume on
points outside their PPCs (E F)
good
,
B
: Increased Production &
Consumption in Each
Country
C drainage
S
- paratiy vie ,
↳
when country good country
one has a lower
opportunity cost in the
production of a than another
has
PPC
.
* The
country with a FLATTER PPC
Comparative Advantage
a in the
good
the horizontal
* on Axis than the other
country
w * The
country with a STEEPER PPC has a C A .
in the
good on the vertical Axis
A
Country
Cost sacrifice of
County Opportunity one
good
=
B
gain of
the other
good
good B
when Country As
opportunity cost
for good A < B's for
good A
Unrealistic Assumptions A ↳ A has
of C
comparative Advantage good A
.
a In
There is
peject mobility factors
·
of
I production with country * Law
of Comparative Advantage If countie
specialise
-
There
full employment all a trade
according to them C A
global production
&
consumption
·
of
.
is ,
because allocation
resources will increase
of an
improvement the global in
of
While both counteres will
Transportation costs ignored making all counties better
off
·
are resources ,
.
points outside
ther PPCs
There
homogenous products produce they can consume on
·
are on
,
their PPCs .
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