Cars and Trucks

The Global Call For Benz

Absolute advantage is the ability of one person or nation to produce a good or service using fewer resources (See economic goods and services.) One nation can have an absolute advantage over another in the production of a particular good or service it has a more advanced level of technology or better resources . Similarly, one person can have absolute advantage over another in some area because of natural abilities or a higher level of training or experience. For example, Saudi Arabia has absolute advantage over Japan in oil production (thanks to its natural resources), while Japan has an absolute advantage in car production (thanks to its investment in technology and capital goods.
ADVERSE SELECTION
Adverse selection may occur in a transaction when one party has more information than the other prior to the transaction. The less desirable transactions from the uninformed person’s point of view are the most likely to occur. For example, people who know that their car is not a good one are likely to sell in the used car market. Also, people who privately know their health is bad are likely to buy health insurance. Thus an “adverse” or bad selection of transactions is offered. This is not always good for business.
Aggregate demand is the total of all demand in the economy including consumption, investment, and government spending. The aggregate demand curve is a graph that plots the total demand for goods and services in the country against the overall price level. Aggregate demand is determined by adding up:
1)All personal spending within the economy
2)All planned business investments
3)Net exports (the amount of exports minus the amount of imports)
4)All government spending
As the price level for goods and services increases, the aggregate demand decreases.

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