From the perspective of aless developed country, the developed countries' superior technology need not imply thatLDC industries cannot compete in international markets. Another striking result is that the technologically superior country's comparative advantageindustry survives while the same industry disappears in the other country, even though theworkers in the other country's industry has lower wages.
In the end, the price of eachcountry's export good (its comparative advantage good) will rise and the price of its import good(its comparative disadvantage good) will fall.
Comparative advantage, service trade, and global imbalances
A country must have a comparative advantage in production of a good, rather than anabsolute advantage, to guarantee continued production in free trade.
Lost Islamic History | Al-Biruni: A Master of Scholarship
Advantageous trade based on comparative advantage, then, covers a larger set of circumstances while still including the case of absolute advantage and hence is a more general theory.
The price of each country's comparative advantage good will be lower than the priceof the same good in the other country.
The following story is meant to explain some of the insights within thetheory of comparative advantage by placing the model into a more familiar setting.
Profit-seeking firms in each country's comparative advantage industry wouldrecognize that the price of their good is higher in the other country.
Interpreting the Theory of Comparative AdvantageThe garden story offers an intuitive explanation for the theory of comparative advantage and alsoprovides a useful way of interpreting the model results.
This highlights the importance of specializing in production of the task in which you have acomparative advantage.
The usual way of stating the Ricardianmodel results is to say that countries will specialize in their comparative advantage good and trade them to the other country such that everyone in both countries benefit.
Apr 19, 2017 · Good read. As an economics student, I have always appreciated the concept of comparative advantage to explain the …
Instead we carry the logic of comparative advantage to the real world and ask how things would have to look to achieve a certain result (maximum output and benefits).
19/04/2017 · Good read. As an economics student, I have always appreciated the concept of comparative advantage to explain the …
In the end we should not say that the model of comparative advantage tells us anything about what will happen when two countries begin to trade; instead we should say that the theory tells us some things that can happen.