Comparative

Rashed Humod Alqhtany Module 03: Critical Thinking Comparative Advantage: Challenges Theory of Comparative Advantage One of the most powerful propositions of classical trade theory is that the pattern of international trade is determined by comparative advantage. That is, a country with the comparative advantage in a given commodity exports, and the other with the comparative disadvantage imports. Adam Smith has founded the comparative advantage originates theory, and there have been numerous

have the comparative advantage, and then trades those element, all countries are better off. This theory called the law of comparative advantage became the primary reason for international trade. Now a days MNC are the primary actors of international trade, and the bargaining model that they use with countries government can appear as a practical implementation of the law of comparative advantage. In fact Dunning, J. H. (2000) estimate that competitive advantage which is a type of comparative advantage

Surname: Salmon First name: Tati Student number : 12421179 Does the idea of comparative advantage provide a good explanation of current patterns of international trade? For the last two centuries the international trade evolved a lot and many economists tried to explain it. One of the first theories that attempted to explain the international trade pattern was the Absolute advantage theory. A.Smith was a great economist; he is the one who created this theory. For A. Smith countries should specialize

grew out of the earlier discipline of philology. 1.2. The rise of comparative method: Comparative and historical linguistics were often treated as a single discipline. Firstly the main concern of historical linguistics was to study about Comparative Linguistics in which linguists were concerned about how two languages are related to one another when they are derived from a common ancestor. This notion of comparative linguistics was given by Sir William Jones a British judge in India

different trade theories like Mercantilism, non-mercantilism, absolute advantage thory, comparative advantage theory are some of those. Mercantilism is an economic system used in European countries in 1800s. and 16th to the mid 18th century. under mercantilism the countries wealth is measured by the accumulation of valuable metals like gold and silver.(Piggott. j and cook .m)

Comparative advantage is a principle developed by David Ricardo in the early 19th century to explain the benefits of mutual trade (Carbaugh, 2008). Many underlying assumptions of comparative advantage depend on states of economic equilibrium and an absence of economy of scale. In reality, economies are dynamic and subject to innovation and interference; which has led to revised assumptions of return and competition (Krugman, 1987). These factors have created questions of free trade and governmental

commodity in which it poses a comparatives advantage over others. In order to identify the strong sector in the economy, the actual trade flows was analyzed. This idea was later improvised and refined by Bela Balassa and gave his famous Balassa Index. This index is commonly used in International Economics to calculate the relative advantage or disadvantage that a country poses in a certain class of goods and services. The value of the index shows the revealed comparative advantage of a country in good

The theory of comparative advantage is perhaps one of the most important concepts in international trade theory. A country has an absolute advantage in the production of a good relative to another country if it can produce the good at lower cost or with higher productivity. Absolute advantage compares industry productivities across countries. In the case of Zambia, for instance, the country has an absolute advantage over many countries in the production of copper. This occurs because of the existence

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

Comparative and Absolute advantages: Comparative advantage is the ability to make or produce something at a lower opportunity cost. Opportunity cost is something that we do every single day in the way we live our lives. This is giving up something for something else. If you wanted to buy some new sports gear for your man cave it may cost $100, but if you only make $50 a week. You unfortunately would have to give up spending any of your money for two whole weeks to buy some of this new swag. So you