Absolute Advantage And Comparative Analysis
Comparative and Absolute Advantage
Introduction
With many changes in the international business platform and political climates in different countries, there have been resultant changes in how these countries do business. International trade has also been largely boosted by globalization which on the other hand fueled by technology. Consequently, international trade has its dynamics and is affected by different factors. Consequently, different countries have different comparative or absolute advantages in comparison to others. Comparative advantage is used when considering the capacity to produce certain goods or services at a lower opportunity than another producer. On the other hand, absolute advantage is the capacity to produce goods or
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There are also several determinants that contribute to economic growth in different countries. In the global platform, the main determinant is the international trade between countries where some have a better trade than others. To be productive, a state requires some drivers with the main determinants being political climate. The political climate in any country sets the stage for all other factors because the leadership determines the level of peace, ease of doing business, technological advancement, and production capacities. The other determinant land is an essential factor of production as well as capital and labor. With the availability of these resources, any country can become a leader in trade as far it produces competitive products (The World Bank, …show more content…
The consumption, in this case, refers to both individual and public consumption (Benzoni and Goldstein, 2010).
In the US, the economic lifecycle is made of robust elements I n both the private and public consumption considering the economic stability of the nation and the population. Despite having a segment being in the low-income group, a majority of Americans live relatively expensive lifestyles compared to other nations.
On the other hand, the Chinese are many in number which is a good factor in production, but their production cannot equate to their lifestyles. The reason is with high populations; there is high competition which leads to low incomes directly related to the economic lifecycle. It follows that the purchasing power of these people cannot be equated with that of Americans. On the other hand, the Chinese state is far richer than the American, which the former giving loans to the latter which is an illustration of the effect of wealth derived from the population growth (The World Factbook
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