Explain How It Is Possible for One of Two People

question 72

Essay

Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods,but trade can still benefit both people.

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Definitions:

Unemployment Rate

The portion of the labor market that consists of people who are jobless and actively on the lookout for work.

Favorable Supply Shock

An unexpected event that increases the supply of a good or service, leading to a lower equilibrium price.

Short-run Phillips Curve

A graphical representation showing an inverse relationship between the rate of unemployment and the rate of inflation in the short-term.

Unemployment

The situation in which people who are willing and able to work are not able to find employment, often expressed as a percentage of the labor force.