In: Economics
Absolute Advantage has nothing to do with world trade. Absolute advantage only indicates who could produce the most of something, but not necessarily at the lowest marginal opportunity cost. Only comparative advantage – producing at the lowest marginal opportunity costs - is relevant in world trade.
- Who would be better off? Who would be worse off? Why?
- What is the difference between a ban and an import tax?
- Look at explanation in Unit 2 Seminar slides of computing who has the comparative advantage and how to calculate the relative marginal opportunity costs between two parties (see below images).
- Knowing who has the comparative advantage (knowing what they trade) says nothing about who has the absolute advantage.
And…
A nation has a absolute standpoint in delivering a decent finished another nation on the off chance that it utilizes less assets to create that great. Total preferred standpoint can be the aftereffect of a nation's normal gift. For instance, extricating oil in Saudi Arabia is practically simply a question of "boring a gap." Producing oil in different nations can require significant investigation and expensive advances for boring and extraction—if in reality they have any oil whatsoever. The United States has a portion of the wealthiest farmland on the planet, making it simpler to develop corn and wheat than in numerous different nations.
A nation has a relative/comparative favorable position when a decent can be created at a lower cost regarding different merchandise. The inquiry every nation or organization ought to ask when it exchanges is this: "What do we offer up to create this great?" It ought to be nothing unexpected that the idea of near preferred standpoint depends on this thought of chance cost from Choice in a World of Scarcity. For instance, if Zambia concentrates its assets on delivering copper, its work, arrive and money related assets can't be utilized to create different products, for example, corn. Thus, Zambia surrenders the chance to deliver corn. How would we evaluate the cost regarding different products? Improve the issue and accept that Zambia simply needs work to create copper and corn.
The nation with similar favorable position will be in an ideal situation and the nation with total preferred standpoint will be more regrettable off.
Import obligation is a duty gathered on imports and a few fares by the traditions experts of a nation. It is generally in light of the estimation of the merchandise that are foreign made. Contingent upon the specific situation, import obligation may likewise be alluded to as traditions obligation, duty, import assessment or import tax. A prohibition on the importation of specific items from a specific nation into the nation of origin.