Free trade
Definition. Free trade is the exchange of goods and services between countries without government imposed barriers such as tariffs, quotas, or subsidies that distort prices and quantities. It allows nations to specialise according to comparative advantage, raising total world output and potential consumption beyond what is achievable in isolation.
By removing protectionist barriers, free trade lets each country export goods it produces at lower opportunity cost and import goods that others produce more efficiently.
This term belongs to Comparative Advantage in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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