David Ricardo: A Comparative Analysis

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Microeconomics is an essential education that includes many theories, which are set up by many influential economists. Surprisingly, David Ricardo was one of those important economists, who came up with the Ricardian model of comparative advantage. This theory assumes that one country might have many absolute advantages, but there is only one comparative advantage in condition of only two countries in the world, each country can produce two products and uses one factor of production that is labor hour (Suranovic, 2007). On the other hand, before figuring out what a comparative advantage is, some key words, such as an opportunity cost and an absolute advantage must be learnt. According to the principle of economics book, opportunity cost is…show more content…
Otherwise, the principle of comparative advantage states that a person or a firm has a comparative advantage over another person if his/her opportunity cost of performing a task is lower than the other person’s opportunity cost (Frank, Bernanke, & Lui, 2013). Besides, it is vital for two countries to apply the principle of comparative advantage; so that they can determine what products they should specialize in, and it is also beneficial for both countries since they can do business together by exchanging products. Therefore, as a consequence of neighboring countries that can produce the same goods, such as rice and rubbers, Cambodia and Vietnam employ the principle of comparative advantage to determine which product they should specialize…show more content…
The economy of Cambodia follows a free market system; while the economy of Vietnam follows socialist-oriented market economy which is a developing planned economy and market economy. For Cambodia, its economy depends on agriculture which is rice is the most important food crop. Rice production plays a vital role to support Cambodian farmers’ finance, and it is also the staple food of Cambodians. Cambodian farmers cultivate rice for both seasons, which are dry season and wet season. Fortunately, Cambodia is rich in natural resources, such as fertilized lands and rainwater, which is convenient for cultivators to grow plants. Moreover, as Cambodia is an active country in producing rice, she has become a rice exporter (Yu & Diao, 2011). Based on data in 2013, the harvest areas of rice were 2 485 559 hectares and the total production of rice was 7 259 989 tons (MAFF, 2016). From this information, the analyst assumes that the rice yield in Cambodia is 2.92 tons per hectare. Similarly, rice production also takes part in the growth of Vietnamese economy. About nine million families, and another million of the poor rely on rice farming because rice is the staple food of Vietnamese, and they can trade rice for profit (Thang & Linh, 2013). Vietnam is also known as one of rice leading exporters around the globe and has productivity agricultural lands, which are useful for cultivation.

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