Asked by Aaron Ehsanipour on May 09, 2024

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What insights about international trade came from Adam Smith and David Ricardo?

Adam Smith

A Scottish economist and philosopher known as the father of modern economics, famous for his work "The Wealth of Nations."

David Ricardo

David Ricardo was a British political economist best known for his theories on comparative advantage, which describe how nations can benefit from trading.

International Trade

The exchange of goods and services between countries, which allows for greater diversity of products, lower prices, and increased economic efficiency.

  • Understand the principles of comparative and absolute advantage in international trade.
  • Delve into the benefits that free trade brings to the global economic system and highlight major impediments to trading activities.
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Shayoom Al-bloushiiMay 16, 2024
Final Answer :
In 1776, Adam Smith used the concept of absolute advantage to argue for international specialization and trade. He noted that nations will be better off if each specializes in the production of those products in which it has an absolute advantage and is therefore the most efficient producer. In the early 1800s, David Ricardo extended Smith's idea by demonstrating that it is advantageous for a country to specialize and trade with other countries even if it is more productive in all economic activities than any other country. It only needs a comparative advantage. Ricardo also demonstrated that it is advantageous for a country to specialize and trade with other countries even if it is less productive in all economic activities than other countries. It can also benefit from trade just as long as it has a comparative advantage in at least one product.