1. Film and Ben
International Trade

2. Absolute Advantage Definition:
Absolute Advantage exists when a country is able to produce a good more cheaply in than another country

3. ‘Pre-specialisation' situation

6. Comparative advantage
When a country has a margin of superiority compared to another country at producing g/s.
Such as opportunity cost of production is lower.
Countries will specialize and export products which use intensively the factor of productions which they are most provided with.

7. The result from specialization is the increase in total output and economic welfare.
Countries will specialize in products which have the lowest opportunity cost of production.

8. Benefit of specialization greater when the country reach economies of scale.
To start trading, 2 countries have to set an exchange rate considering the opportunity cost ratio of one another. (Terms of trade)

9. Assumptions:
Perfect occupational mobility of factors of production - resources used in one industry can be switched into another without any loss of efficiency
Constant returns to scale (i.e. doubling the inputs in each country  leads to a doubling of total output)
No externalities arising from production and/or consumption
Transportation costs are ignored
Increase specialisation doesn’t lead to diseconomies of scale
No Trade barriers
Type of goods
Identical goods being traded
Stable exchange rates
Demand for extra output produced.

10. Comparative advantage is a dynamic concept.
Factors that effect demand & supply:
The quantity and quality of factors of production available 
Investment in research & development 
Movements in the exchange rate.
Long-term rates of inflation .
Import controls such as tariffs and quotas 
Non-price competitiveness of producers