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Theory of Comparative David Ricardo, the nineteenth-century economist from Britain, solved the problem of the theory of absolute advantage, by developing the theory of comparative advantage. Absolute advantage predicts that no international trade would occur if one nation has an absolute advantage over two goods. But this theory shows that trade would still happen as […]

Factor Proportion Theory             This theory further extends the concept of comparative advantage that exists for certain countries and this is explained in detail by the factor proportions theory. This theory hypothesizes that nations would generate materials that use plenty of production factors which are produced in the same country itself. In case of materials […]