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Essay / Research Paper Abstract
This 3 page paper is a clear and easy to read explanation of the theory of comparative advantage and other aspects of international economics linked to international trade theory. The bibliography cites 1 source.
Page Count:
3 pages (~225 words per page)
File: TS14_TEcompara.rtf
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Unformatted sample text from the term paper:
can make for itself are imported. One of the theories used to explain this is the theory of comparative advantage. This looks to the way the goods may be manufactured
and be to the benefit of both countries, even if both countries can only make the same goods (Nellis and Parker, 2000). If we use a single example we can
explain this more simply. It we have two countries both with the same resources; A and B, both only make two products; cars and scooters. Country A could make
either 1000 scooters or 500 cars, but for some reason, possibility more labour or easier access to the parts country B can make either 2000 scooters or 500 cars. If
both countries want to have both cars and scooters and they put half of their resources to each we will see country A have with 750 units, 500 scooters and
250 cars. County B would have 1250, made up of 1000 scooters and 250 cars, making this a total output of 2000 units if both goods are desired and no
trade takes place. However, if the countries work together and specialise it the goods that are most efficient at making then country B will be making the scooters, as
it can make more of these wit the same resources. Compared to country A it is country B had the comparative advantage. So, if country B makes the scooter, this
leaves the cars to country A, so we will have total output of 200 scooters and 500 cars. If each country exports half for the goods each country will have
1250 units, made up of 1,000 scooters and 250 cars. This increases the overall output to 2500 for both countries. For Country A there is a gain of 250 units,
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