The Comparative and Absolute Advantage in Economics Essay

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Economics of nations

Absolute advantage in trade and specifically production is when a given country has the best and most efficient way of producing the goods than any other country involved in that given trade. On the other hand, the comparative advantage focuses on a single country producing say two products and the same products being produced by another country. If country X can produce product A at cheaper economic sacrifice and cost than they produce product B, yet country Y can produce product B at a cheaper economic sacrifice and cost than A, it can then be said that country X has a comparative advantage in product A as compared to country Y and the same applied to country Y on product B.

The country in consideration here is Brazil, its top major exports are sugarcane, beef, motor vehicles and spare parts, textiles and steel. On the beef, textile and sugarcane it can be said that Brazil has absolute advantage and on the steel and motor vehicle it can be said that other nations like Japan have the comparative advantage.

The major exports for the US are soybeans, corn, fruit, organic chemicals, aircraft, motor vehicle parts, computers, telecommunication equipment, automobiles, medicine among other products (CIA, 2018).

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It is not expected that the same goods to be the same all over the world since there are intervening economic factors in different countries such as cost of labor, the taxes across borders, the demand and supply ratio, cost of transport of the product from the point of production to the point of sale, product positioning, competition within that market, economic strength of the nation that will dictate the exchange rates are all factors that help determine the variation in process, these factors are the same that affect the price of the same Big Mac from one country to another.

The US trade deficit as indicated in the debt clock website is $820,267,701, on the other hand, the trade deficit with china is indicated as $390,121,261, meaning 47.5% of the trade deficit is with China (US Debt Clock, 2018).

Using the converter, the $200 dress would cost the British visitor 148.5 pounds. Free trade reduces the cost of importation, hence reduction in business production cost hence promoting economic growth. It also improves efficiency in trade and encourages innovation as there are goods from outside to offer….....

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