International Trade Theory(Absolute advantage)

Nishant singh(128938)

International trade

• Mercantilism

• Comparative advantage

•Absolute advantage

• The product life cycle

• Factor proportions theory

Adam smith

Absolute advantage

labour labour

absolute advantage refers to the

ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources.

• Party A can produce 5 widgets per hour with 3 employees.

• Party B can produce 10 widgets per hour with 3 employees.

Smith also asserted that country-specific advantages can either be

natural acquired

Natural advantage

• climatic conditions

• access to particular resources

• the availability of labor

acquired

• a distinct advantage in skills

• technology

• capital assets

if one country has an absolute advantage in both products

NO TRADE WOULD OCCUR

Absolute advantage’s flaw:

?

Thank you