Absolute and comparative advantage of international trade

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If we look at the world, there are countries rich in resources and with a low population and countries where the increase in population is not accompanied by an increase in resources, which leaves room for a series of problems.

International trade can also be useful in this scenario, remembering the importance of complementarity between different countries.

But leaving aside the global scenario, launching into international trade can represent a turning point for your business if you have an e-commerce.

Let's see together how and why.

In 1700, the Scottish economist Adam Smith laid the foundations of what we now call political economy, demonstrating in his writings which economic activities were most appropriate to allow each country involved to obtain economic benefits and develop the economy at a national level.

These theories are known as absolute advantage and comparative advantage.

Absolute advantage
Absolute advantage is an advantage of one country over germany email list another in terms of resources and production.

To clarify this concept, let's take an example. Let's consider two nations A and B. If nation A is able to produce greater quantities of a certain product and in less time than nation B, it has an advantage over the latter, defined as absolute advantage .

This theory is based on a basic concept: each nation has better or larger quantities of resources and raw materials than the others. Therefore, if France has more raw materials to produce cloth and more manpower than Spain, it will have an absolute advantage over the latter, because it is able to produce them in greater quantities and in less time.

On the other hand, in Spain there could be the same situation but with reference to another product in which this nation has specialized. In this way, Spain will also have an absolute advantage over France and will be able to produce a certain commodity, for example wheat, in greater quantities, more quickly and of higher quality than France.