international trade theory

1. International Trade Theory
(Absolute advantage)
Nishant singh(128938)

2. International trade

5. • Mercantilism
• Comparative advantage
•Absolute advantage
• The product life cycle
• Factor proportions theory

6. Adam smith
Absolute advantage
labour labour

7. absolute advantage refers to
the ability of a party (an
individual, or firm, or country)
to produce more of a good or
service than competitors,
using the same amount of
resources.

8. • Party A can produce 5 widgets per hour with 3
employees.
• Party B can produce 10 widgets per hour with
3 employees.

9. Smith also asserted that country-specific advantages
can either be
natural acquired

10. Natural advantage
• climatic conditions
• access to particular resources
• the availability of labor

11. acquired
• a distinct advantage in skills
• technology
• capital assets

13. if one country has an absolute advantage in
both products
NO TRADE WOULD OCCUR
Absolute advantage’s flaw:
?

14. Thank you