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Essay / Research Paper Abstract
This 3 page paper looks at the concepts of absolute advantage in comparative advantage comparing and contrasting the two. The paper then defines and discusses opportunity cost and considers the way in which this is seen with in international trade theory. The bibliography cites for sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEabadvtg.rtf
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Unformatted sample text from the term paper:
produces and what imports. Adam Smith stipulates that each nation should concentrate on producing goods where they have the absolute advantage (Smith 1994). This means that they should produces the
goods that they can produce in a more effective manner than any other nation. For example, in a two country world where only two goods produced each country will be
producing only one good, and using that to trade with the other nation to the good where they have the disadvantage. In international
trade each country should import any commodity where they have the absolute disadvantage; that is where they can only produce the commodity at a high cost than any other nation.
For example, if one country can produce 100 tons of coal for the same cost as 200 tons of potatoes, and one can produce 100 tons of potatoes for the
same cost to resources as 200 tons of coal, each country should produce the commodity that has the lowest cost and then trade for what it needs.
In this way resources are maximized through the comparative advantages. However, this model is very simple, and in reality there are many nations trading many
goods, and the development of trade has not followed this model (Seyoum, 1999). In many cases a country will still produce some of a commodity that another national can produce
more cheaply (Seyoum, 1999). Adams model has been popular and it is a good starting point with specialisation leading to more
effective use of resources. It is also possible, in limited models to see this applied, especially with primary industries, but the application is very limited when looking for supporting cases
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