Theory of Comparative

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 one nation will have a comparative advantage over the other in one product and the other nation in another product

Illustration

Nations like Australia with great amounts of land export products cultivated in the land, like cattle and grain. Also nations like China would be keen to import such products as it has a great demand for space due to its growing populace (populace (Mahoney et al. 1998).