Question

whats the importance of international trade and comparative advantage?

Answer 1

Following are the importance of international trade

1.It increases the employment opportunities across the globe

2. It helps in technology transfer from one country to another

3. It helps in the transfer of goods and services from one country to another in the most efficient and possible way

4. It helps in the mutual benefit of both the countries that are involved in the trade

• Comparative advantage in simple terms is the situation when an economy is doing trade with another economics and if the first country is producing at a lower opportunity cost than rest of the countries, it will be said that 1st country has a conparative advantage over the others
• Comparative advantage is a key factor which is used by many economies to have an edge over the other countries in the production of goods and services
• For example, let's say two countries China and Germany . China is good in producing steel and Germany, on the other hand, is good at producing cars so China can produce Steel at a lower opportunity cost than Germany ,and same for Germany in respect of cars and hence both of them have a comparative advantage over others in their respective production