Question

This is Econ 310. Book: International economics robert carbaugh 16th.

How did Smith, and Ricardo differ in explaining the basis for trade-please elaborate on Ricardo’s ideas. CHAPTER 2

Answer 1

Accordinf to Smith it is not possible for all the nations to export and accumulate wealth simultaneously as one country's exports are other country's imports. However he agrued that it will be beneficial for all teh nations to practice free trade and specialize in accordance with their absolute advantage. A nation will have absolute advantage in acommodity if it produces more with the same amount of resources such as less lamount of labour and raw materials.

According to Ricardo it is not necessary to have absolute advantage for trade between two countries, According to him trade is beneficial even when there is no absolute advantage for any country. According to him a nation will export that commoditry in which it has comparative advantage with respect to other countries. A nation will have comparative advantage in that commodity in which its opportunity cost is low with respect to other country.