Question

State the theories of:

11. Smith,

12. Ricardo,

13. Heckscher-Olin,

14. Porter,

Answer 1

11.) THEORY OF SMITH :-

According to theory, under free and unregulated trade, a nation should specialize in producing those goods it could produce most efficiently. The capability of a nation to produce more of a good with the same amount of input than another country.

According to Smith, wealth of an economy is the value of its total output which includes industrial and agricultural output. Growth increases wealth by increasing total output, income and wealth and standard of living.

12.) THEORY OF RICARDO :-

Theory of Recardo attributed the cause and benefits of international trade to the differences in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities among countries. Ricardo simply discussed the theory of distribution which is based on marginal principle which explains the surplus principles, the division of the remaining shares between the wages and profits.

13.) THEORY OF HECKSCHER OLIN :-

According to this theory, a nation will export the commodity whose production requires the intensive use of the nation's relative abundant and cheap factor and import the commodity whose production requires the intensive use of the nation's relatively scarce and expensive factor.

14.) THEORY OF PORTER :-

This theory suggests that states and businesses should pursue policies that create high-quality goods to sell at high prices in the market. Porter emphasizes productivity growth as the focus of national strategies.