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Essay / Research Paper Abstract
This 5 page paper looks at the reasons for international trade focusing on the advantages as explained by David Ricardo’s theory of comparative advantage, considering w it had been built on Adam Smiths theories and the way it was adjusted with the Heckscher-Ohlin (HO) Model. The bibliography cites 7 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEcomprative.rtf
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Unformatted sample text from the term paper:
the sale and purchase of goods internationally. The common sense approach may indicate that some countries can produce goods that other cannot due their natural resources, which may include weather
land types or even cheaper or more plentiful labour. In these circumstances, where one country cannot, or would find is very expensive, to produce one type of good it becomes
apparent why they may then purchase those goods form another country and use their own resources more efficiently. The demand for those goods drives this approach. Looking to explain this
in terms of economic theory we need to look at international trade theory. The basis of explanations that look at the
advantages in these terms all focus on absolute advantage and comparative advantage. With Adam Smith we see the foundations of what was
to become the theory of comparative advantage, although this is not the formation of the theory. Smith stipulates that each nations should concentrate on producing goods where they have the
absolute advantage (Thompson, 2005, Smith 1994). This means that they should produces the goods that they can produce in a more effective manner than any other nation.
Conversely, in international trade they should also 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 tones of coal for the same cost as 200 tones of potatoes, and one
can produce 100 of potatoes for the same cost to resources as 200 tones of coal, each country should produce the commodity that has the lowest cost and then trade
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