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Outline the Classical / Ricardian theory of International Trade - What do you regard as the main strengths and weaknesses of this theory as an explanation of trade patterns?
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Outline the Classical / Ricardian theory of International Trade. What do you regard as the main strengths and weaknesses of this theory as an explanation of trade patterns? Adam Smith said that by trading freely this would benefit countries as people would consume more then they otherwise would. This is true because different countries produce differing goods and by trading with one another consumers can consume those foreign goods. If there was no trade then only domestic goods could be consumed. Ricardian theory is one of comparative advantage. This is where a country chooses to produce then trade with a country within a good of which it has a comparative advantage in its production. The assumptions underlying the comparative advantage theory are as follows; the first is that the countries have only one factor production this is labour. Although this is the only factor countries have differing productivities. This is caused by...
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