Question

1.Explain why trade leads to mutually beneficial gains

2. Provide a definition of comparative advantage and absolute advantage and make sure that you describe the difference.

3. Think about an example from your own life, someone you know, sports, entertainment, or business that demonstrates how comparative advantage is used in the real world.

Answer 1

Answer 1

Trade lead to mutually beneficial gains

larger output and productivity increases indeed can ok not only in the manufacturing sector but also in other sector in which technological upgradation of the advanced country is embodied. Trade lead to mutual benefit gain means a situation in which an individual or business or country can produce a good or services at a lower opportunity cost then another a country that has an absolute advantage in producing all goods Steel stand to benefit from trade with other countries since the basis of the gain for trade is comparative advantage not absolute advantage.it is possible for an individual or country to have a comparative advantage in all goods.there will be some other individuals or country that can produce somethings at lower opportunity cost. Countries usually specialised in and export products which use intensively the factor inputs which they are most abundantly endowed. The dynamic Asian economies including China has force there resources in exporting low cost manufactured goods which take advantage of much lower labour cost. Absolute advantage simply compares the productivity of a worker between countries.