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Terms of Trade and the Gains from Trade | AP Macroeconomics | Khan Academy

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In this video, we explore how we can use opportunity costs to determine who has comparative advantage in producing a good. By specializing in the production of a good that a country has comparative advantage in, and trading for the other good, both countries have the potential to benefit from the exchange. We can also figure out a trading price (also known as the "terms of trade") which would make both countries willing to trade. View more lessons or practice this subject at http://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/basic-economics-concepts-macro/scarcity-and-growth/v/terms-of-trade-and-the-gains-from-trade-macroeconomics-khan-academy?utm_source=youtube&utm_medium=desc&utm_campaign=apmacroeconomics AP Macroeconomics on Khan Academy: Welcome to Economics! In this lesson we'll define Economic and introduce some of the fundamental tools and perspectives economists use to understand the world around us! Khan Academy is a nonprofit organization with the mission of providing a free, world-class education for anyone, anywhere. We offer quizzes, questions, instructional videos, and articles on a range of academic subjects, including math, biology, chemistry, physics, history, economics, finance, grammar, preschool learning, and more. We provide teachers with tools and data so they can help their students develop the skills, habits, and mindsets for success in school and beyond. Khan Academy has been translated into dozens of languages, and 15 million people around the globe learn on Khan Academy every month. As a 501(c)(3) nonprofit organization, we would love your help! Donate or volunteer today! Donate here: https://www.khanacademy.org/donate?utm_source=youtube&utm_medium=desc Volunteer here: https://www.khanacademy.org/contribute?utm_source=youtube&utm_medium=desc
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Text Comments (8)
Sagar Nandi (1 month ago)
Thank you so much. Take my gratitude sir🙂
Sir Valiant III (1 month ago)
Best explanation I've found so far. Especially considering my teacher refused to meet with me to help me with terms of trade
Monique D (1 year ago)
Why didn't we find the price to sell shirts? Is it because the opportunity cost is higher than for pants?
Liu Guanting (1 year ago)
isn't the onther way round?
AR99RA (3 months ago)
+AVA the cost to produce pants is half shirt, for the other one is 1.5. so 0.5 costs less
bishakha shrestha (5 months ago)
i have the same doubt!
AVA (10 months ago)
i agree, im confused by this. How is the energy of one pants half that of one shirt when it takes twice the amount of energy to make 1 pants. Shouldnt it be reversed? Op cost of pants is 2 and op cost of shirts is 1/2?
Jan Sasha (1 year ago)
Beautiful

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