Basic Concept Of Absolute Advantage
Absolute advantage is the ability of an individual, company or country to produce a good or service at a lower cost than any competitor. An entity with an absolute advantage requires fewer inputs and/or has more efficient processes, allowing it to undercut its competitors’ prices and earn higher profits.
International trade theory, however, tells us that two entities will benefit from specialization based on their areas of comparative advantage.
Every action has a cost, even the ones you don't pursue. Find out how this is calculated.
Most investment choices involve a tradeoff between risk and reward. The "Efficient Frontier" is a modern portfolio theory tool that shows investors the best possible return they can expect from their portfolio, given the level of volatility they're willing to accept.
Nash Equilibrium is a key concept of game theory, which helps explain how people and groups approach complex decisions. Named after renowned mathematician John Nash, the idea of Nash Equilibrium has been used in such diverse fields as international relations, psychology and economics. Game theory in general looks at how individuals or groups make choices that will in turn affect the choices of other parties.
The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. A trade surplus occurs when a country sells more than it buys from foreign markets.
Tariffs, or customs duties, are taxes imposed on foreign goods and services. In addition to providing a country with additional revenue, tariffs offer protection to domestic producers. Imported items become more expensive, allowing businesses at home to become more competitive with their pricing.
Learn about this law of economics related to consumption.
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