BUSINESS ENVIROMENT
SECTION 1
International trade can describe as the exchange of goods and services between two or more countries. International trade brings much advantage such as low production cost, like when a country is buying goods at a cheaper rate from another country. It will reduce their production cost because they will stop or reduce the production of those particular goods
International trade serve some country as a major source of income like china that depends on trading with most countries for their major source of revenue
Comparative advantage
Comparative advantage exist when a country has lower opportunity cost over another country in production of goods for example china can say to have comparative advantage over Vietnam because its produce more finish goods at a cheaper cost than Vietnam. Comparative advantage is good to all countries involved.
A country can gain comparative advantage by specializing in a particular product which they are good at like Britain specializing in financial services thereby gaining comparative advantage of France that specialize in champagne
The principle of comparative advantage (David Ricardo, 1817) states that it is not necessary to have absolute advantage, only a comparative advantage, he further explains that one need to make something at a lower cost in terms of other goods sacrificed to gain comparative advantage
A country can have absolute advantage over another country if the country can produce goods using smaller resources than another country like if a unit of labour to produce 90 units of wool in china and 30 units of wine while in France 1 unit of labour produce 20 units of wool and 70 units of wine then china has an absolute advantage ...