The Theory of Comparative Advantage

I buy an American. In recent years, especially since the economic recession, this has become a credo of the "patriot" of the people. Recent employment law through Congress may even have subsidies to encourage it. But what is the impact of purchasing American-made products? Will it create employment for Americans? Can I save a car industry that is in danger? Or it will eventually hurt our economy. According to the theory of comparative advantage, the latter may be the truth. In addition to buying goods from the United States, we should redirect our employees' attention to the superiority of products we produce abroad and the trade industry.

Comparative Advantage Theory: - Comparative Advantage Theory helps to produce only the lowest opportunity cost items compared to other countries, while encouraging importing goods at higher opportunity costs compared to other countries We stipulate that. It is high. In the 19th century, David Ricardo showed advantages of comparative advantage using numerical examples. Prior to this, the initial logic associated with free trade may be beneficial, based on absolute advantage. In his example, Ricardo showed there are two countries in England and Portugal. If the UK is good at producing low-cost fabrics and the same superior production costs are higher than Portugal, Portugal is good at producing wine and the cost of winemaking is higher than that of England.

In 1817, British political economist David Ricardo advocated a theory of comparative advantage in his book "Political economy and taxation principle". This comparative advantage theory is also known as comparative cost theory and is considered to be a classical theory of international trade. According to classical international trade theory, each country has the best products for production, the natural grace of soil climate quality, transportation means,

Please pay attention to how to improve Ricardo's theory of comparative advantage and Smith's theory of absolute superiority. According to the Investment Encyclopedia, the comparative advantage is the economic law that proves that protectionism in free trade (then Mercantilism at the time) is unnecessary. A comparative advantage arises when countries can produce goods and services at lower opportunity costs. This means that a country can produce relatively cheap products than other countries.