Because the concept of absolute advantage doesn't take cost into account, it's useful to also have a measure that considers economic costs. Based on what you have read, please address the following questions: Which do you feel is a better approach, free or fair trade, and why? Static comparative advantage. Comparative advantage is the ability of one party to manufacture goods and/or produce services at a lower opportunity cost than another party. Comparative advantage is a powerful tool for understanding how we choose jobs in which to specialize, as well as which goods a whole country produces for export. Comparative advantage is a term associated with 19th Century English economist David Ricardo.. Ricardo considered what goods and services countries should produce, and … More simply, this means that a … Comparative Advantage . This article addresses the issues of the development of the concept of competitive advantages. a. Mars and Venus should continue producing the quantities indicated by the asterisks(*). A natural comparative advantage exists within a country that has natural resources that are required to produce a product, while an acquired comparative advantage is the advantage gained by an individual or a country by spending a lot of time or resources producing a product. Explain carefully the doctrine of comparative advantages based on the concept of specialization. Which of the following statements is correct based on the concept of comparative advantage? Comparative Advantage Definition. This paper presents a reconciliation of the two based on global value chain/supply chain analysis and the concept of vertical comparative advantage. c. mars should specialize in the production of clohing. Comparative advantage is a situation in which a country may produce goods at a lower opportunity cost than another country, but not necessarily have an absolute advantage in producing that good. It can be argued that world output would increase when the principle of comparative advantage is applied by countries to determine what goods and services they should specialise in producing. 1. d. venus has the comparative advantage in clothing A developing economy, in sub-Saharan-Africa, may have a comparative advantage in producing primary products (metals, agriculture), but these products have a low-income elasticity of demand, and it can hold back an economy from diversifying into more profitable industries, such as manufacturing. Basic Economic Concepts Absolute and Comparative Advantage Absolute Advantage is the comparison of productivity of a person, company, or nation to another person, company, or nation and the ability to produce with fewer inputs (what is used to make the product) than another producer. We offer the best custom writing services. Argue the case for and against economic integration with the African continent. What problems are often encountered when nations attempt to individually maximize gains from trade through specialization? We have done this question before; we can also do it for you… It is based on theories of different writers, their explanation and a literature review of these theories. Comparative advantage, economic theory, first developed by 19th-century British economist David Ricardo, that attributed the cause and benefits of international trade to the differences in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities among countries. b. mars should specialize in the production of food. Comparative advantage. In economics, the term is often applied to entire nations and their economies. Given the concept of comparative advantage, should we even be discussing free versus fair trade? 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