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E1 A detailed explanation of how international trade leads to the benefits and costs identified using relevant theories. David Ricardo: David Ricardo was born at April eighteenth 1772 in London and died on the eleventh of September 1823. He was one of the most important British economist in 1800. In economics, the theory of comparative advantage explains why it can be beneficial for two countries to trade, even though one of them may be able to produce every kind of item more cheaply than the other. What matters is not the absolute cost of production, but rather the ratio between how easily the two countries can produce different kinds of things. The concept is highly important in modern international trade theory The Theory of Comparative Advantage Consider Table 1. It can be seen that Portugal can produce both wheat and wine more cheaply than England than it has an absolute advantage in both...

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