Absolute and Comparative Advantage (HL only)
Benefits of International Trade
AO2·AO4·Diagram required·HL
Syllabus requirement
Understanding how countries gain from trade by specializing in goods they produce most efficiently. Includes opportunity cost comparisons and the source of advantage.
Assessment objectives
AO2 Application and AnalysisAO4 Use of Appropriate Skills
Required diagram: Linear PPCs for two countries with different opportunity costs, illustrating specialization and gains from trade.
Higher LevelThis topic is assessed at HL.
Summary
This topic explains absolute advantage and how specialization and trade increase world output using linear PPCs. It shows that when countries produce the goods they are more productive at, total production and consumption can rise, and it uses a two-country, two-good model to illustrate gains from trade and opportunity costs. The material is HL-only and prepares students to draw linear PPCs showing specialization and mutually beneficial exchange.
