- International Trade
  - Why Countries Trade
    - International Trade Theory
      - Absolute Advantage Theory
        - Proposed by Adam Smith
        - Countries specialize in products they are most efficient at producing
        - Example: America efficient in wheat, China in t-shirts
        - Benefits of specialization and trade
          - More products available for both countries
          - Consumers benefit from cheaper prices
      - Comparative Advantage Theory
        - Stressed by David Ricardo
        - Focuses on lower opportunity cost
        - Example: America's cost of t-shirts vs. China's
        - Even if one country is more efficient in all goods, trade benefits remain
          - Different relative efficiencies drive trade
    - Importance in Economics
      - Satisfying unlimited wants with limited resources
      - Avoiding inefficient production
    - Key Takeaways
      - Two theories explain why countries trade
        - Absolute advantage theory
        - Comparative advantage theory