comparative_and_absolute_advantage.docx

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Running head: COMPARATIVE AND ABSOLUTE ADVANTAGE 1 Comparative and absolute advantage Name Institutions Date
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COMPARATIVE AND ABSOLUTE ADVANTAGE 2 Comparative and Absolute Advantage Introduction International trade occurs among economies with huge variations in opportunity cost in production. To be able to have a comparative advantage in the global trade, a country should focus and specialize to a degree in a particulars product and the trade those products. However, a huge proportion of global trade comprises of intra-industry trade in which same industries trade goods from one country to another. For instance, the US manufactures and exports autos while at the same time it imports autos, making it a substantial importer and exporter of goods from and to the same industry. In trade, absolute advantage defines the ability of a country to efficiently produce certain products and goods compared to another country ( Czinkot, Ronkainen, & Moffett, 2011) . Economies that require smaller volumes of input to produce and deliver goods to thought to have an absolute advantage in trade. Comparative advantage, on the other hand, defines the ability of an economy to produce particular products at a comparatively low opportunity cost. Although an economy may have an absolute advantage compared to another in the delivery of all products; various economies could have distinctive comparative advantages in any case. Comparative advantage, as well as absolute advantage, is the basic and arguably the most important concepts with regards to the theory of international trade. With regards to absolute advantage, an economy can produce and exchange more products in material significance compared to other economies. With regards to comparative advantage, on the other hand, there exist an opportunity that an economy has an absolute advantage in all types of production, while other economies could benefit through specializing in exports as well as imports. This paper focuses on three economies; USA, China, and Democratic Republic of Congo in analyzing
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COMPARATIVE AND ABSOLUTE ADVANTAGE 3 measures of absolute as well as the comparative advantage. Below is a comparative table showing the three countries recent key economic indicators; Country Real GDP CPI Real exports Unemployment rate Industrial production USA $17 trillion 243.86 $2.1 trillion 4.30% 2.20% China $11.2 trillion 118.5 $1.2 trillion
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