Question

What is the meaning of the statement: "The english had an absolute advantage in the production...

What is the meaning of the statement:

"The english had an absolute advantage in the production of textiles while the french had an absolute advantage in the production of wine. Thus a country has an absolute advantage in the production of a product when it is more efficient than any other country at producing it".

Global Business Today - Chapter 6 Page 159

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Answer #1

The above statement related to Adma Smiths Theory of Absolute Advantage theory of international trade.

According to the theory, the basis of the international trade is the absolute advantage of the cost of production over other countries in the production of the certain goods.

The county will export those goods to international market which has an absolute cost advantage and import those goods which have absolute disadvantage goods.

In the above case study, England will export textile other hand import Wine from France. Likewise, France will export Wines and import Textile form England.

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