Absolute advantage
A country, individual, or firm has an absolute advantage in producing a good if production of the good absorbs fewer resources (or less time, in the case of an individual) than are required in other countries or by other individuals or firms. (Ralph Byrns)
This is one of the most important basic concepts of international trade. If to speak about a meaning so absolute advantage is considered to be a trade principle when one country sells goods at a lower cost than another country. That means a country can produce it by lower cost using some different manufacturing technologies or logistics.
Businesses which have absolute advantages might manufacture some goods by using less number of inputs than another entity which is manufacturing the same kind of product. As such, absolute advantage can reduce costs and make bigger profits. (Investopedia)
Using the same input of resources a country with an absolute advantage will have greater output. Assuming this one good is the only item in the market, beneficial trade is impossible. (David Ricardo) An absolute advantage is one where trade is not mutually beneficial, as opposed to a comparative advantage where trade is mutually beneficial. It is used in every country no matter of continent and geographical position and depends on type of goods and manufacturing technologies and innovations.
Comparative advantage
A country has a comparative advantage in the production of a good if it can produce that good at a lower opportunity cost relative to another country. The theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. (David Ricardo) What matters is not the absolute cost of production but the opportunity cost, which measures how much production of one good, is reduced to produce one more unit of the other good. (James Mill) One of the clearest explanations of comparative advantage ever written was in fact one of the first explanations ever written. In 1821, James Mill saw that Ricardo's exposition was hard to understand, so he clarified it in his Elements of Political Economy (David Ricardo)
Heckscher-Ohlin factor endowment
The Heckscher-Ohlin factor is very important for the global economy. The model of the international economy is astonishingly contemporary, dealing as it does with economies of scale, factor mobility, trade barriers, non-traded goods, and balance-of-payments adjustment, among others. (Eli F. Heckscher and Bertil Ohlin)
Heckscher's original article explains the impact of differences in factor endowments on intercountry income distribution and international specialization, and demonstrates that the resulting trade in mobile goods is a substitute for factor mobility in reducing factor-price differentials. His brilliant insights were propagated through the writings, in English, of his student Bertil Ohlin.
What cultural, physical, economical, financial, and political impediments might prevent the successful application of your selected trade theory?
Let us take into consideration the comparative theory of international trade which was invented by David Ricardo and try to understand the factors that interrupt its’ development. The main factor …