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Absolute and Comparative Advantage

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The Importance of Gains from Trade
In most cases, people in an economy want to buy a wide variety of goods and services. These goods and services can either all be produced within the home country's economy or can be obtained by trading with other nations. Because different countries and economies have different resources, it's usually the case that different countries are better at producing different things. This concept suggests that there could be mutually beneficial gains from trade, and, in fact, this is indeed the case from an economic perspective. Therefore, it's important to understand when and how an economy can benefit from trading with other nations.

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