Distinguish Between the Theory Of Absolute Advantage And the Thoery of Comparative Advantage and Outline Any Four Reasons Countries Engage in International Trade
Distinguish Between the Theory Of Absolute Advantage And the Thoery of Comparative Advantage
ABSOLUTE ADVANTAGE
(i) Absolute advantage describes the ability of a specific country to produce goods at a lower cost per unit.
(ii) Trading is not mutually beneficial for two countries.
(iii) Allows a country to produce a higher volume of goods with the given amount of resources.
(iv) Considers advantage of producing numerous goods
COMPARATIVE ADVANTAGE
(i) Comparative advantage describes the ability of a specific country to produce goods at a lower opportunity cost.
(ii) Trading is mutually beneficial for two countries.
(iii) Allows a country to produce goods better than another nation with the same amount of resources.
(iv) Considers overall production of a nation during a given time frame
Outline Any Four Reasons Countries Engage in International Trade
The Four Reasons Countries Engage in International Trade are as follow:
(i) differences in technology,
(ii) differences in resource endowments,
(iii) differences in demand,
(iv) the presence of economies of scale,
(v) the presence of government policies.
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