Comparative Advantage model of Trade theory

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Comparative Advantage model of Trade theory

  1. 1. International Business Comparative Advantage model of Trade theory Jasmeet Singh
  2. 2. Comparative Advantage Ability to produce at opportunity cost Absolute Advantage Ability to produce at resources another country Opportunity Cost #the value of the next best alternative foregone as the result of making a decision Gain OC = Sacrifice Sacrifice Gain # wikipedia.org
  3. 3. Y Y Jute India Jute Bangladesh 10 8 A1 A2 5 4 4 2 X 4 X 8 Sugar Sugar Oppt. Cost = Sacrifice /Gain or X/Y or Y/X (easier way) So to grow 10 tones of Jute, India have to give up 8 tones of Sugar thus 10/8 = 5/4 (point A1) and to grow8 tones of Jute, Bangladesh have to give up 4 tones Of Sugar thus 8/4=4/2 (point A2). Values are in tones
  4. 4. Y Y Jute India Jute Bangladesh 10 8 A1 A2 5 4 Thank you 4 2 X 4 X 8 Sugar Sugar Oppt. Cost = Sacrifice /Gain or X/Y or Y/X (easier way) So to grow 10 tones of Jute, India have to give up 8 tones of Sugar thus 10/8 = 5/4 (point A1) and to grow8 tones of Jute, Bangladesh have to give up 4 tones Of Sugar thus 8/4=4/2 (point A2). Values are in tones

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