Compare And Disadvantages Of A Comparative Advantage Theory?

1067 Words5 Pages
Comparative advantage: it is one of the most important concepts in economic theories. It is referring to the ability of any country to produced goods at a lower opportunity cost than other county. If there is the trade-off between the 2 products when determined time is limited country must give up labor units of one product to produce other product at this time this country has a comparative advantage proportional with relatively more effective.
Absolute advantage: it is the ability of a country to produce a good product at a lower cost per unit. Than the cost at which any other entity produces with same good. If the time is unlimited and in the case of trade-off between two products this country should produce all because it has ability to
…show more content…
Therefore, by using the comparative advantage theory in different country can create more jobs, reduce risks to economic security and increase purchasing power. For example, If Japan can produce some set of goods at lower cost than another country, and if the other country can produce some other set of goods at a lower cost than we can produce them, then clearly, it would be best for us to trade our relatively cheaper goods for their relatively cheaper goods. In this way both countries may gain from…show more content…
This agreement is of particular importance for Egypt, as the European Union is its most important trading partner. Also, it has concluded free-trade agreements and to the United States under the QIZ protocol, Egypt is a WTO member. But in my opinion free trade reduces the welfare of a small country. Where free trade enables lower prices for consumers, increased imports, benefits from economies of scale and a greater choice of goods. Which have bad effect on the local
Open Document