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Comparative advantage specialization and gains from trade | Microeconomics | Khan Academy

1349 ratings | 587980 views
How two parties can get better outcomes by specializing in their comparative advantage and trading Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/gains-from-trade-tutorial/v/comparative-advantage-and-absolute-advantage?utm_source=YT&utm_medium=Desc&utm_campaign=microeconomics Missed the previous lesson? https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/production-possibilities/v/economic-growth-through-investment?utm_source=YT&utm_medium=Desc&utm_campaign=microeconomics Microeconomics on Khan Academy: Topics covered in a traditional college level introductory microeconomics course About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy's Microeconomics channel: https://www.youtube.com/channel/UC_6zQ54DjQJdLodwsxAsdZg Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
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Text Comments (69)
Volf McCarnivor (9 months ago)
Nom nom nom on the nom nom scale? Compare to the nom nom scale! I wonder where I was on the nom nom scale? Ethics. Jesus loves you.
Ahmetcan Caglayan (11 months ago)
I'm an International Business and Trade Major. I hate economics. The graphs make me sick.
LemonDrop (1 year ago)
Suppose that currently the United States produces 500 tons of shrimp and 1,000 tractors while Thailand produces 100 tons of shrimp and 1,500 tractors. Each country only consumes what it produces. Now assume that trade opens up between the two countries. If Thailand focuses on producing only shrimp, how many more tractors can be produced in total while keeping total shrimp production the same? answer is 1500 but hoooowww?
Lady Lea (11 months ago)
LemonDrop I want this explanation now lol
Andrea Gonzales (1 year ago)
So helpful!!!!!!!!!!!! thanks
priyanshi goel (1 year ago)
if both the producers are producing in the same economy, then hoe can their OCs be different?
priyanshi goel (1 year ago)
who gave this theory by the way?
Tulsi Patel (1 year ago)
This content definitely helped me with my community college course. Feeling scatterbrained but the lighting and somehow the way you were worded this content made sense to me.
Jose Molina (1 year ago)
"The Gang Sells Cups"
ross (1 year ago)
lmao!
Riccardo Colnaghi (1 year ago)
We assume 1 cup for 1 plate. However, what if market prices were different? What if we produced cars from one hand and eggs from the other hand? maybe every country would prefer to specialize in cars production, because they sell for a much higher price on the market. How do we take into account relative prices and so on?
Reaps51 (2 years ago)
That god Patty wasn't trading with another woman or we'd be stuck with two girls one cup. .. ...I'll see myself out.
Jake Luk (2 years ago)
Thank you thank you thank you
Johnny Cash (2 years ago)
Very dumb down explanation. Great job man, it really helps a lot
lilfro012 (2 years ago)
thanks vlad
Brandon Carter (2 years ago)
how do you know everything ever.
ThisWorldOfEpicness (2 years ago)
This guy is a God
Dinuka Malith (3 years ago)
Are we assuming that we are trading all 15 cups with another country?
MasterRia (3 years ago)
now its clear for me ..thank you
Dhruv Patel (3 years ago)
If a country has an absolute advantage, does it - always - have a comparative advantage in at least one of the two goods?
Aprajita Sharma (3 years ago)
Hi, A query, is trade between a developed country with and undeveloped country better or with another developed country? (Based on comparative advantage)
LemonDrop (1 year ago)
I think it's based on what they're trading. wheat and dvds or dvds and tablets, etc.
Squishy (3 years ago)
Great video, as always!
C Miclat (3 years ago)
Very good/simple explanation of absolute and comparative advantage :)
Zachary Adams (3 years ago)
You know when you say a word a bunch of times and they start to loose meaning? That just happened to me with plates and cups. 
ThisIsRTSThree999 (2 years ago)
+The Voyager are you into spamfisting?
ThisIsRTSThree999 (3 years ago)
+Zachary Adams to me with Charlies and Patties.
sana jamal (3 years ago)
best ever - well explained
Mohamed Bushra (3 years ago)
Dude youtre amazing at explaining. I'm taking an online Macro course which I have to understand on my own. I found it a bit tricky because the given e-book doesn't really detail their explanations like you. Bravo!
Austin Jackson (4 years ago)
He needs to do this with not so nice numbers
Brad Norris (4 months ago)
Until one side has an absolute advantage...
Gordon Freeman (1 year ago)
he uses nice numbers to not brainfuck people with numbers and teach the logic. once you learn the logic you will care about numbers no more
fudhujanta (1 year ago)
thas what im sayinnn
Bijoy Salahuddin (4 years ago)
I read this theory in International Business since it is an International Trade theory focused on Free Trade. After watching this video now it seems to me confusing.... :P
bershka sen (4 years ago)
Thank you! I would love to know more about you (the man behind the voice). Is there a link to your profile somewhere ?
bershka sen (4 years ago)
you are awesome.... so clear and funny as well. It is a pleasure to learn from you. I go to a leading business school (top 3) for MBA. The MBA costs > USD 100,000 But our teachers suck. THE BEST THINGS IN LIFE ARE FREE :)
Dr Joseph S Maresca (4 years ago)
Excellent presentation. Take a look at a book on comparative advantage. http://www.amazon.com/Americas-Comparative-Advantage-Joseph-Maresca-ebook/dp/B00JT4WHYU/ref=la_B00G08H5ZO_1_2?s=books&ie=UTF8&qid=1400720806&sr=1-2
ThisIsRTSThree999 (3 years ago)
+Dr Joseph S Maresca did you write it or what? or why are you making marketing for it?
How did you get 15 plates as the optimal? 
Because there are two people involved in the exchange. 30÷2=15
Sarah Steinmetz (4 years ago)
I get it now. Thank you so much.
Brandon Jacobs (4 years ago)
There are no gains from specialization only weaknesses when exploited you die or lose to someone who never specialized. UK never specialized and easily conquered Gambia whose only product is Peanuts. This is my theory of Comparative Advantage Trap in a peanut shell. By not specializing in only what you are good at, you increase your purchasing power against someone else who specializes. Food is 1/3rd of the US average household budget. If they didnt specialize...and grew their own food they would have that money to out bid others competitively for other goods.
Gregory Bogosian (4 years ago)
Growing your own food takes time, effort and material resources like land and equipment. The opportunity cost of all of those things usually outweighs the financial benefits of not having to buy food. Have you ever known anyone to get rich by growing crops in their backyard?
revathy santhakumar (4 years ago)
K
The American Bolshevik (4 years ago)
In 7:38 didn't you intend to write 1 cup?
Ahmed Islam (4 years ago)
Thanks a lot this was really helpful
Justin Simmons (5 years ago)
This is great! Thanks a lot
Roberto Santiago (5 years ago)
Aaaaaaaaaahhhh!!! Please put real captions on this! Auto-Captions are terrible.
JNguyen (5 years ago)
Charlie and cups, because they start with "C" and Patty and plates, because they start with "P": brilliant. xD
Caroline O (5 years ago)
Good for you ").
Caroline O (5 years ago)
How mean! First of they could have dyslexia, or maybe just made a typo. Why 'laugh out loud' at that and then question their intelligence? If they just can't spell, note that it doesn't take an intelligent person to know how to spell, it just requires having a good memory. I believe that you and your 9 amigos ought to be saddened for finding humour in belittling a 13 year old.
francis C (5 years ago)
thanks a lot, if only you can do that of hecksher ohlin model
Samed Hysa (5 years ago)
any1 know how much total output would therefore be?
John Pitt (5 years ago)
thanks for your wonderful lecture and i get so many information form your each Economic lecture and appreciate for your great job and hope that you will do more better in the future wish you all the best
Roberta Elaine Fitness (5 years ago)
So after you figure out comparative advantage, how do you determine a trade price. I get stuck on that one? Thank you.
12thando34 (6 years ago)
IM SORRY
Fabrice A. (6 years ago)
Thank you and wonderful. explained in very simple terms.
banjo2861 (6 years ago)
Great help and easy example - succinctly and clearly illustrated - Due Econ exam soon and this was a great help - Thank u
No_Baby (6 years ago)
lol "microeconomecics" yea, u def know wat ur talking bout
No_Baby (6 years ago)
Just how much does this Mr. Khan know? It's not like he's a jack of all trades but a master of none but he actually knows what he's talking about and, most importantly, he knows how to communicate that knowledge. Whatta bawss. (@[email protected])
Alexandria B (6 years ago)
maybe its different from school to school. but we learned all of this in Microeconomics
G (6 years ago)
Its really not to complicated, but being 12 I suppose it is,
12thando34 (6 years ago)
maybe u shud just leave this to us old people lol kidding...microecon...nice stuff i promise u
12thando34 (6 years ago)
these videos are awesome and even more so because they are in a playlist
doodlebuggyjump15 (6 years ago)
Your videos are really much help man especially as an A Level student. There are a few parts that I don't understand and this helped me. =)
DigitizedSelf (6 years ago)
These videos are great for relaxing and not thinking too much.
vatovindicator (7 years ago)
im 12 and what is this
Justan Edwards (7 years ago)
I'm 13 and know more microeconomecics than most people in high school
aaronlosing (7 years ago)
Just finished two semester of micro then macro econ. Good stuff, Sal.

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