Which of the following concepts identifies specialisation as the main driver for international trade? Select one:...

Which of the following concepts identifies specialisation as the main driver for international trade?

Select one:

a. Comparative advantage theory

b. Purchasing power parity

c. International Fisher effect

d. Product life cycle theory

e. International diversification

Expert Solution

Option (a) is correct.

Comparative advantage theory tells about the factors responsible for international trade. If any country specializes in the production of certain goods which are not produced in the other country then former country has comparative advantage over the other country in the production of those goods.In a similar way if later country specialises in the production of some other goods then it will have comparative advantage over former country. So, in this case both countries will be benefitted if they involve in international trade with each other, if they have demand of each others' goods in their respective country's. And it originates the international trade.

jeff jeffy answered 2 years ago

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