Question

In the classical school with trade, country specialization is “complete.” Why??? What is this attributed to???

Answer 1

Classical theories of international trade was contributed by Adam Smith and David Ricardo.They gave importance in complete specialization in their theories of trade. Complete specialization is a situation in which a country produces and export that commodity in which the country is efficient in producing at low cost. The country will have to focus only on that particular good. According to classical theories , if countries engaged in trade follows complete specialization, it will help to increase the production with more efficiency than there produced when there is incomplete specialization. The basis of international trade can be attributed to specialization. If a country makes all the products it requires, it is not beneficial for it. Instead if a country specializes in the production and exporting of any particular goods in which they are efficient in producing, it can benefit from trade. for example, if a country can produce cloth at low cost than wheat, then it will be beneficial for the country if it specializes only in the production of cloth and decides to import wheat from the country which specialize in production of wheat at low cost.

According to classical, complete specialization in trade will help both the countries engaged in trade to benefit. It can result in increase of world output as country specializes in production of a limited number of goods and services.