AMP-83596-5-JKWB.docx - Running head INTERNATIONAL RELATIONS INTERNATIONAL RELATION Student’s Name Institutional Affiliation Date 1 INTERNATIONAL

AMP-83596-5-JKWB.docx - Running head INTERNATIONAL...

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Running head: INTERNATIONAL RELATIONS 1 INTERNATIONAL RELATION Student’s Name Institutional Affiliation Date
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INTERNATIONAL RELATIONS 2 International relations is concerned with the way in which nations interact in regards to culture, politics and economic growth. Countries have to support and interact with one another in order to grow and bring about financial stability among nations. The two most important concepts when handling international relations are absolute and comparative advantage as they are largely involved in how nations devote resources to the production of a particular good. Through this two concepts free trade is well evaluated and understood hence countries are able to describe their basic economic benefits. The basis of the concept Absolute advantage is related to the capability to produce more of the product by employing less given resources without considering competing entity. For instance, if a country has an absolute advantage it means that they sell their products at a lower cost than other countries. Comparative advantage on the other hand, is all about lower marginal and opportunity cost that a party enjoys over the other when producing a particular good. The essay shall discuss the t heories of comparative and absolute advantage by providing a substantive basis for arguments in support of free trade. The Two Concepts in Relation to Free Trade It is clear that both comparative and absolute advantage determine whether a country is ready to lead in business or not. This concepts rule over trade and are the key to an economically stable country as well as encouraging free trade. For example, countries that exercise comparative advantage tend to enjoy more successful business ventures in terms of selling their products. These kind of countries are at a competitive advantage because they have efficient technologies, resources and systems that ensure they produce at a lower opportunity cost. On the other hand, those that have an absolute advantage have a leverage in setting prices in the market as a result of their production systems which are cheaper in terms of resources, labor, materials and many
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INTERNATIONAL RELATIONS 3 more. Due to this kind of cheap resources any country experiencing an absolute advantage thrives in the market place as they are able to sell at competitive price.
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  • Spring '08
  • DONNELLAN

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