The Theory of Comparative Advantage
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This paper analyzes the theory of comparative advantage and explains that it offers trading companies of the world a channel for their product distribution and a way to exchange skills. The paper looks at how America specializes in computer and IT products, with its Intel company, while Korea specializes in mass production and automation, with its Kia company. The paper concludes, however, that specialization will eventually limit trade relations.
From the Paper:"The theory of comparative advantage stemmed from David Ricardo during the 19th century when the economist presented the model that countries of the world depend on their resources to create trade. In his model Ricardo says that a country may specialize in certain resources to produce, for instance in skilled labor while another country could specialize in process production techniques. As a result of this the countries would be able to produce more then trying to produce the whole product on its own. This theory has become the basis for International trade in today's world. It could be applied to the various major industries of the world in the sense that a country like Japan may specialize in automation process while a country like America can specialize in skill labor. When combined, they create a stronger trade relation then compared to trying to produce and develop skill labor at the same time."
Cite this Analytical Essay:
The Theory of Comparative Advantage (2003, October 02) Retrieved June 06, 2020, from https://www.academon.com/analytical-essay/the-theory-of-comparative-advantage-35398/
"The Theory of Comparative Advantage" 02 October 2003. Web. 06 June. 2020. <https://www.academon.com/analytical-essay/the-theory-of-comparative-advantage-35398/>