Sources of Comparative Advantage
6 important questions on Sources of Comparative Advantage
Factor endowments as a source of comparative advantage:
· Labor costs
· Product prices.
The factor – endowment theory, Heckscher – Ohlin theory:
· What determines comparative advantage?
· What effect does international trade have on the earnings of various factors of production in trading nations?
According to the Heckscher – Ohlin theory factor (resource) endowments determine a nation’s comparative advantage and asserts that the immediate basis fort rade is the difference between pre-trade relative product prices of trading nations. These prices depend on the production possibilities frontiers and tastes, and preferences (demand conditions in the trading countries.
How does the relative abundance of a resourde determine comparative advantage according to the factore – endowment theory?
- Higher grades + faster learning
- Never study anything twice
- 100% sure, 100% understanding
The effect of resource endowments on comparative advantage can be summarized as followed:
Differences in relatieve resource prices
Differences in relative product prices
Pattern of comparative advantage
Is international trade a substitute for migration?
Wage inequality can be affected by the following factors:
· Immigration: Immigration of unskilled workers results in a decrease in the supply of skilled workers relative to unskilled workers, thus promoting higher degrees of wage inequality.
· Education and training: As the availability of education and training increases, so does the ratio of skilled workers to unskilled workers. Additional opportunities for education and training thus serve to reduce the wage inequaltiy between skilled and unskilled workers.
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
![Trustpilot Logo](/images/design_2020/lp/clp-trustpilot-en.png)