The document presents a discussion on international trade, highlighting the necessity for countries to engage in trade due to their inability to produce all goods domestically. It explains two key theories—absolute advantage, developed by Adam Smith, and comparative advantage, proposed by David Ricardo—both of which support the idea of free trade and specialization. The document provides examples of exports and imports from India and outlines the benefits of trade for both exporting and importing countries.

1. COLLEGE OF AGRICULTURE AND RESEARCH STATION
BOIRDADAR, RAIGARH
Presentation On :- International Trade, theories of absolute and comparative advantage
Submitted By :-
Paras Naik
Student Id :- 20221715
Submitted To :-
Dr. Meenakshi Chandra
Department of Agricultural Economics

2. International Trade
 The exchange of goods and services (trade) among countries
across national boundaries is known as international trade.
 No country can be self-sufficient in producing all the goods and
service required by it.
 Thus, Counties need to trade to obtain commodities, they cannot
produce themselves or they can purchase else where at a lower
price.
 The act of selling domestically produced goods to international
Consumers is known as exportation.
 Ex- India Exports refined Petrolium, Jewellery, Rice etc.
 Most common destination for exports of India are United states,
China, Bangladesh, Hong kong etc.

3.  The act of purchasing goods from a foreign
country. In order to sell them domestically is
known as importation.
 Ex.- India imports crude oil, Coal, Gold,
Electronic item etc.
 Most common countries are USA, UAE,
China, Saudi Arabia.

4. International Trade - Why/Reason
 Countries cannot domestically produce all the
goods and services that each individual consumer
wants and needs.
 Each country has different factors of production.
(Land, labour and Capital)
 When domestic production is greater than
domestic demand for a good, excess production is
traded on the international market.

5. ABSOLUTE ADVANTAGE
 This theory was developed by Adam Smith.
 Talks about who can do it better,
cheaper and quicker.
 Absolute advantage, says that one country would
have an absolute advantage over the other if it
can produce same amount of goods or greater
output of a good or service than other countries
using the same amount of resources or even less.

6. EXAMPLE :-
 Party A can produce 5ton of cassava per hour
with 6 employees and
 Party B can produce 10ton of cassava per hour
with 6 employees.
Assuming that the employees of both parties are
paid equally, Party B has an absolute advantage
over Party A in producing cassava per hour. This is
because Party B can produce twice as many
cassava as Party A can with the same
number of employees.

7. COMPARATIVE ADVANTAGE
 This theory was developed by David Ricardo.
 Comparative advantage refers to the ability of
a party to produce a particular good or service
at a lower marginal and opportunity cost over
another.
 The conclusion drawn is that each party can
gain by specializing in the good where it has
comparative advantage, and trading that
good for the other.

8.  Even if one party is more efficient in the
production of all goods (absolute advantage in all
goods) than the other, both countries will still gain
by trading with each other, as long as they have
different relative efficiencies.
EXAMPLE- 2 parties producing 2 commodities with
the same resources, time, all factors been equal.
Output as shown below:-
• Party A-1000tons of cassava, 2500tons of cotton.
• Party B-1000tons of cassava, 1000tons of cotton.

9. SIMILARITIES
 Both theories supports Free Trade approach
unlike the mercantilism theory.
 Both theories elucidates a concept of Division
of labour.
 They talk about gains for both home and host
country.(positive sum game).
 Specialization.
 Among others.

10. THANK YOU