Classical Theories of Trade Rely on the Theory of Comparative

question 41

Essay

Classical theories of trade rely on the theory of comparative advantage as developed by David Ricardo.What is comparative advantage and how does it affect trade?

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Definitions:

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization to fund government spending and various public expenditures.

Comparative Advantage

The ability of an individual, company, or country to produce a good or service at a lower opportunity cost than competitors.

Exports

Products or services originating from one country and sold to buyers located in a different country.

Imports

Goods and services bought by a country from other countries. Imports can include a wide range of items, from raw materials to finished goods.