how does comparative advantage differ from absolute advantage and Heckscher-Ohlin's theory

Expert Solution

Answer - The concept of comparitive advantage states that the country should specialise in that good and should also trade in that good in which it enjoys the lower opportunity cost. This means that the economic cost of producing the good should be lesser than producing the other good. This helps to cater the gains from trade. The comparitive advantage concept forms the base on which trade is carried out.

On the other hand , absolute advantage does not favor trade. It states that country manufactures the goods which is can manufacture in a greater quantity than its competitor. It does not talk about opportunity cost

The H-O model also , states that country should produce those goods and export those good in which it has the abundance of resources. Goods can be labor intensive or capital intensive. This should be done to increase efficiency and save cost. It does not talk about opportunity cost.

Rahul Sunny answered 1 year ago

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