Essay on Comparative and Absolute Advantage

4211 Words Aug 8th, 2016 17 Pages
Comparative and Absolute Advantage
ECO 561
Alfred Igbodipe
7/24/16

Introduction
Due to the differences between the countries in its profitable fundamentals; the International Trade occurs. The contracts between the countries consider as the primary driver of the global exchange. These contracts concluded on the basis of the countries beneficial elements and advantages. Each international trade between the countries depends on numerous focal points of this exchange process. The economics and producers effectiveness measured by absolute advantage for these economics/producers. For example; if the producer needs lesser amount of contributions/inputs to provide specific product, then this producer has an absolute advantage in producing
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The growth rate of the U.S GDP stands at 3.23 percent from 1947 up to 2016(Cuñat & Melitz, 2012). In the international trade, the absolute advantage indicates the ability of the economy to conduct tasks appropriately. The comparative advantage identifies the economy, which produces the goods with the lowest opportunity cost.
The United States has an absolute advantage over the technological products and services which are critical. Within the global markets, the U.S has been able to provide tech products and services appropriately. However, it has comparative advantage of offering tech services while the absolute advantage exists in technology design and providing industrial capacity. The U.S is a major exporter in the international markets of products such as civilian aircraft, semiconductors, cars, car accessories, fuel oil, and organic chemicals among others. Such exports improve the U.S's comparative and absolute advantage.
China
The economic growth rate of China rate grew by 1.8 percent following the measure of economic growth which is the GDP growth rate. The GDP growth rate is one of the adequate economic growth measures. It indicates that the rate expanded 1.8 percent in the second quarter of 2016 increasing from the previous quarter of 1.2 percent growth. It also surpassed the market projections of 1.6 percent expansion (Levchenko & Zhang, 2016). It was the strongest economic growth