International Trade Comparative and Absolute Advantage in International Trade Discussion

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Watch the above videos. Once you have done this click on the above link “International Trade” and create a thread with at least one page answering and explaining the following:What is the difference between comparative and absolute advantage?Visit the following World Factbook (Links to an external site.), select two countries of interest to you (other than U.S.), select the economy section, scroll down and locate at least five of the country¬ís major exports. Are these exports indicative of an absolute or comparative advantage? Using the same World Factbook Website above, what are the major exports for the U.S. Should we expect goods to be the same price all over the world? What factors might make a Big Mac more expensive in one country relative to another?Visit the debt clock website at http://www.usdebtclock.org/ (Links to an external site.) and locate the on the U.S. Trade Deficit? What is the deficit indicated? In percentage terms approximately how much of this deficit is with China? Visit the following Yahoo Currency Exchanger site (Links to an external site.) and determine how much a $200 dress in N.Y. would cost a British visitor in Pounds? What are the benefits of free trade? Protectionism (e.g. tariffs & quotas)? Which position do you lean toward? Explain your perspective and after you post your narrative, reply to at least two other students comments. Explain why you agree, or better yet, find others that take a different position and explain why you disagree. Also, I need help on making a small reply/comment two student’s work (I will provide it)

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Student #1:
Absolute advantage means that a country is able to most efficiently produce said
product. This means that the country would be able to make more and better quality
products. Comparative advantage on the other hand looks at the two countries and
what product they are capable of making with the amount of resources it would cost to
make the product. Overall it compares the cost of production.
One of the countries I chose was Albania. 5 of their major exports are leather footwear
and parts, crude petroleum, iron alloys, clothing, and perfumes. The second country I
chose was Saudi Arabia. 5 of their major exports are refined petroleum, natural gas,
coal, wheat, and iron. Since these two countries specialize in different exports I could
make the assumption that based on these products, they have an absolute advantage
in producing these commodities.
Major exports of the U.S are crude petroleum, refined petroleum, cars and vehicle parts,
integrated circuits, and aircraft.
We should not expect that goods will cost the same price everywhere around the world.
There are many factors as to why products, such as a Big Mac, would cost a different
amount in California versus Alaska. A factor would be transporting the materials needed
for this product. Getting the products, from the packaging to the ingredients, transported
to these two different parts of the world. Getting products to an island versus a state
located on the continental US would be a difference in cost, therefore this increase
would cause the product to cost significantly more in Alaska versus California.
The US Trade Deficit is 1,071,143,121,201, its percentage with China is 30%.
A 200 dollar dress in the U.S would cost someone in Britain 150.30 pounds.
Free trade is a policy that allows consumers to buy freely from abroad as they would
domestically. Protectionism is a policy that discriminates between domestic and foreign
goods and services. It essentially makes it difficult for consumers to buy products from
abroad, by creating hurdles, for examples, through policies. A tax on imports is created,
which is called a tariff, therefore a consumer would pay more although they do not see
that tariff. Of the two, the position I lean on is free trade. I lean towards it because it
encourages trade, by not having trade restrictions or tariffs. Cities that support free
trade, such as Hong Kong, are very wealthy and succeed under this policy.
Student #2:
Q 1.What is the difference between comparative and absolute advantage?
Absolute advantage and comparative advantages are two significant ideas in financial
aspects and worldwide exchange. They generally impact how and why countries and
organizations dedicate assets to the creation of specific merchandise.
Absolute Advantage
The separation between the shifting capacities of organizations and countries to create
products productively is the reason for the idea of outright benefit. Supreme benefit
takes a gander at the effectiveness of delivering a solitary item.
This examination assists nations with keeping away from the creation of items that
would yield next to zero interest, prompting misfortunes. A country’s outright benefit, or
weakness, in a specific industry, can assume a significant part in the sorts of
merchandise it decides to create.
Comparative Advantage
Similar benefit takes a more all-encompassing perspective, with the viewpoint that a
country or business has the assets to create an assortment of merchandise. The
chance expense of a given choice is equivalent to the relinquished advantages that
might have been accomplished by picking an accessible option in correlation.
When all is said in done, when the benefit from two items is distinguished, experts
would compute the chance expense of picking one choice over the other.
Q 2. Visit the following World Factbook
(Links to an external site.)
, select two countries of interest to you (other than U.S.), select the economy section,
scroll down and locate at least five of the country’s major exports. Are these exports
indicative of an absolute or comparative advantage?
Country – Australia
Five major export items of Australia are as follows 1. Coal
2. Iron ore
3. Gold
4. Meat
5. Wool
Country – India
Five major export items of India are as follows 1. Petroleum products.
2. Precious stones
3. Machinery
4. Vehicles
5. Iron and Steel
International trade is based on comparative advantage. A country generally exports
those goods and services in which it has comparative advantage and generally imports
those goods and services in which it has comparative disadvantage. These exports of
various commodities by Australia and India are indicative of a comparative advantage
being enjoyed by these two countries in production of these commodities.
Q 3.Using the same World Factbook Website above, what are the major exports for the
U.S.
Using the CIA factbook Website we can observe that major exports for The United
states are that of capital goods consiting of transistors, aircraft, motor vehicle parts,
computers, telecommunications equipment etc and constituting a total of 49.0% out of
total exports by the United States.
Q 4 Should we expect goods to be the same price all over the world? What factors
might make a Big Mac more expensive in one country relative to another?
Via the Law of Purchasing power parity we can expect prices of goods to be the same
all over the world, but otherwise we can’t, since differences in prices occur due to
relative value of currencies that is exchange rate and relative prices of basket of
commodities that is relative rate of inflation existing between the 2 countries. Thus,
these 2 factors make a Big Mac relatively more expensive in 1 country compared to
other.
Q 5 Visit the debt clock website at http://www.usdebtclock.org/
(Links to an external site.)
and locate the on the U.S. Trade Deficit? What is the deficit indicated? In percentage
terms approximately how much of this deficit is with China?
It shows that the U.S Trade deficit is at $1,070,738,905,386 and is increasing every
second. Since the total deficit with China is $349,258,777,986 and increasing every
second again. In percentage terms with the entire trade deficit it should be
$349,258,777,986/ $1,070,738,905,386 * 100 = 33% approximately.
Q 6. Visit the following Yahoo Currency Exchanger site
(Links to an external site.)
and determine how much a $200 dress in N.Y. would cost a British visitor in Pounds?
The google currency exchanger site shows that a $200 dress in U.S would cost only
175.88 pounds to a British visitor since $ 1 = 0.88 pounds that is dollar is cheaper than
British pound.
Q 7 What are the benefits of free trade? Protectionism (e.g. tariffs & quotas)? Which
position do you lean toward?
Free trade throws challenge to the domestic producers. They have to maintain the
quality in order to stay in the business.
Free trade satisfies customers by supplying them foreign products at desired quality.
There must be some protection against free trade. It could be done through import
taxes, quotas, etc. Its benefits are as below:
a) It helps domestic suppliers doing business in small scale. If there is no protection,
they may not sustain business because of quality issue and price issue.
b) It helps economy. Free trade is the combination of import and export. If import is
higher than export, GDP would fall. This is not at all desirable. Import restriction in some
areas is therefore very much needed.
I lean toward promoting free trade. It ultimately helps economy by increasing GDP,
increasing standard of living, and increasing happiness. The rest of the things could be
adjusted automatically. Suppose the domestic suppliers would get more opportunity of
doing business, like getting finance at lower interest, getting machinery through imports,
etc.

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Comparative and Absolute Advantage in International Trade

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