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Absolute Advantge: For example if one unit of labor in Scotland can produce 80 units of wool or 20 units of wine; while in Spain one unit of labor makes 50 units of wool or 75 units of wine, then Scotland has an absolute advantage in producing wool and Spain has an absolute advantage in producing wine. Comparative Advantage: Two men live alone in an isolated island. To survive they must undertake a few basic economic activities like water carrying, fishing, cooking and shelter construction and maintenance. The first man is young, strong, and educated and is faster, better, more productive at everything. He has an absolute advantage in all activities. The second man is old, weak, and uneducated. He has an absolute disadvantage in all economic activities. In some activities the difference between the two is great; in others it is small. Is it in the interest of either of them to work in isolation? No, specialization and exchange (trade) can benefit both of them. How should they divide the work? According to comparative, not absolute advantage: the young man must spend more time on the tasks in which he is much better and the old man must concentrate on the tasks in which he is only a little worse. Such an arrangement will increase total production and/or reduce total labour. It will make both of them richer.
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What are the theory identifies specialization as a reason for international business?
theory of comparative advantage.
What is the modern theory of international trade?
The modern theory of international trade works on assumptions of the law of comparative advantage. The comparative advantage arises as a result of differences in the various regions.
What theory identifies specialization as a reason for international business?
comparative advantage
Difference between absolute cost advantage theory and comparative cost advantage theory?
absolute cost advantage talks about the efficiency and cheaply a country incure in the production of goods and services against other country whiles comparative advantage talks about the opotunity cost of goods
To what extent does the theory of comparative advantage explain the rise of the Indian software industry?
h
What are the theory identifies specialization as a reason for international business?
theory of comparative advantage.
What is the modern theory of international trade?
The modern theory of international trade works on assumptions of the law of comparative advantage. The comparative advantage arises as a result of differences in the various regions.
What theory identifies specialization as a reason for international business?
comparative advantage
Difference between absolute cost advantage theory and comparative cost advantage theory?
absolute cost advantage talks about the efficiency and cheaply a country incure in the production of goods and services against other country whiles comparative advantage talks about the opotunity cost of goods
To what extent does the theory of comparative advantage explain the rise of the Indian software industry?
h
According to classical trade theory a country will export an item?
in which it has a comparative advantage in producing
Distinguish betweenTheory of Comparative Advantage and Theory of Competitive Advantage?
please apply your mind and write your IGNOU assignments yourself.
The theory of comparative advantage exists because?
no nation can produce all the products its people want and need.
What are the key elements of Comparative Advantage?
Comparative Advantage is the idea that one person/business/or area can offer a product at a better price than another. The key elements would be the social and economic impact of this theory.
What is the implication for free trade of the theory of comparative advantage?
Under the theory of comparative advantage two nations that each have a cost advantage in the production of a specific product would both benefit from free trade by selling to each other since the total output of both nation's products sold would increase. The mathematical theory of comparative advantage was formalized by David Ricardo in 1817 and hence became known as the "Ricardian model." Economists have long debated the usefulness of the comparative advantage model in the real world since it is counter-intuitive to many people due to the fact that the model is based on two countries producing only two goods and only one factor of production (such as labor). In addition, the model computes comparative cost advantages based on which nation produces goods at a lower opportunity cost which implies that a nation would have to forgo the production of other goods in order to achieve the lowest comparative advantage. Many economists and student of foreign trade prefer to use the theory of absolute advantage in production which is easy to understand since it is intuitive. Under the absolute advantage theory two countries that each produce a particular good at a much lower cost than the other would both become wealthier as they increased production to sell their goods to each other.
Who had presented comparative advantage theory?
The theory of comparative advantage was presented by economist David Ricardo in the early 19th century. Ricardo argued that countries should specialize in producing goods and services in which they have a lower opportunity cost, and then trade with other countries to maximize overall production and consumption.
The law of comparative advantage was developed by who?
The law of comparative advantage was developed by David Ricardo, an economist in the early 19th century. Ricardo's theory explains why countries specializing in the production of goods in which they have a lower opportunity cost can benefit from trade with other countries.
