Comparative Advantage

1. Comparative Advantage -Comparative Advantage When one nation is better able to produce a good or service than another nation -What causes the advantage???

2. Producing Goods -Productivity is the amount of a good or service that can be produced in a given time -What does Increased Productivity do? -What is the Effect of productivity on Inflation??? -Specialization of Labor / Division of Labor -method of having workers do only a part of a product but do it very efficiently -blue collar labor -white collar labor

3. Producing Goods -Labor Intensive Work- job that required a lot of human effort and physical contact -Lower paying jobs -Many labor intensive products produced overseas -Mechanization- using machinery to make products or provide services –called automation Machines sometimes take the jobs of people Increases Productivity

4. Producing Goods -Interchangeable Parts -Mass Production -Assembly Line

5. Growing Businesses -Economies of Scale -the idea that a larger business is more efficient than a smaller one because of its ability to do things in larger volume -Law of Diminishing Returns -economic law that states that the level of return for additional labor or work will decrease at some point and continue to decrease

6. Economic Choices -Opportunity Cost -this is the benefit that you have given up in order to pursue an alternative -Trade Off -this is the choice that you make when faced with economic decisions where you have to choose one thing over another