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FOR JOANNE Applying International Trade Concepts : Please

Resolved Question:

'FOR JOANNE'
Applying International Trade Concepts : Please define absolute and comparative advantage
Submitted: 2 years ago.
Category: Homework
Expert:  Joanne replied 2 years ago.

Joanne : Hi there
Joanne : Thanks for the request, is there a specific length to the response required?
Customer:

no not really. this is awesome, I didn't know that just answer had a chat function

Joanne :

Okay :) I start work on this now. Will be done in a jiffy

Customer:

awesome, thank you

Joanne :

hi

Joanne :

here you go:

Joanne :

Absolute advantage arises when a country is able to produce the same good using fewer resources than another country. For example, both United States and India can produce computers. However, when given 10 units of resources, United States can produce 30 computers while India can only produce 20 computers. In this case, it can be said that United States has absolute advantage in the production of computers.


On the other hand, comparative advantage arises when a country is able to produce the same good at a lower opportunity cost than another country. Opportunity cost is measured by the amount of the next best alternative that has to be given up in order to produce the good. For example, to produce 10 computers, United States have to sacrifice the production of 30 tables. However, to produce 10 computers, India has to sacrifice the production of 15 tables. In this case, India has the comparative advantage in producing computers (Hall & Lieberman, 2007).


As can be seen, a country can have absolute and comparative advantages in the production of different goods and services. Having absolute advantage does not guarantee comparative advantage, vice versa.


Reference


Hall, E & Lieberman, M. (2007). Microeconomics: Principles And Applications. Cengage Learning.


 

Joanne :

Technically, the definitions can be simply 2 sentences long, but I expanded on it and provided examples so that you can better understand the concepts.

Customer:

WOW! That was fast. And you gave a reference too. Thank you so much.

Joanne :

Well, I studied economics before so this was easy for me. Glad to have been of assistance :) Please help by leaving a positive feedback after hitting accept, thank you!

Customer:

Great. Thank you again. Have a great day

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Experience: BSc (Hons) Political Science
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