Video by Khan Academy: Comparative and Absolute Advantage [10:15 min]

The concepts of absolute and comparative advantage help explain the benefits of global trade.

Watch this video from Khan Academy which explains in more detail two different kinds of trade advantages discussed in Section 3.2 that a nation might have in the production of certain goods or services: Comparative and Absolute.

Then, consider this hypothetical example comparing two nations that each can produce both beef and vegetables, the United States and Mexico:

**Productivity With and Without Trade**
	Production Without Trade	Production Without Trade	Production With Trade	Production With Trade
	Beef	Vegetables	Beef	Vegetables
USA (tons)	2,000	20,000	4,000	0
Mexico (tons)	1,000	30,000	0	60,000
Totals	3,000	30,000	4,000	60,000

From what you learned in Section 3.2 and from viewing the Khan Academy video below, how might you explain the reasons production with trade is higher? What are the apparent advantages that a nation can gain from specializing in the production of specific products? (Hint: some nations have comparative advantages in the production of one product over others, facilitated by the unequal distribution of the Factors of Production introduced in Section 1.1).