Theory of comparative advantage
Specify the considerations that could bound extent to which theory of the comparative advantage is practical?
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Theory of comparative advantage was initially developed by David Ricardo, the nineteenth century economist, as explanations for why nations trade with each other. This theory state that economic health is improved in case, citizens of each country generates what they have a comparative benefit in manufacturing comparative to the citizens of another countries, and then trade the products. As per the theory, assumptions of free trade among the nations and that the factors of production (land, labour, buildings, technology, and capital) are comparatively immobile. To the extent which these assumptions don’t hold, theory of relative advantage won’t realistically express the international trade.
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