Which economist gave the concept of comparative advantage?
Show answer & explanation
Correct answer: D
Explanation
Correct Answer:
Ricardo
Explanation:
The concept of comparative advantage in international trade was propounded by the classical economist David Ricardo in his 1817 book 'On the Principles of Political Economy and Taxation'. According to this theory, a country can benefit from international trade even if it is less efficient in the production of every good compared to its trading partner, provided it focuses on producing goods where it has a lower opportunity cost.
Key Points:
David Ricardo introduced the theory of comparative advantage to explain why nations engage in trade even when one nation holds an absolute advantage in all sectors.
Adam Smith, on the other hand, is known for the theory of absolute advantage.
The comparative advantage model forms the foundational basis for modern international trade theory.
Important Questions and Answers:
Question: In which year did David Ricardo publish his book containing the theory of comparative advantage?
Answer: 1817.
Question: Who proposed the theory of absolute advantage in international trade?
Answer: Adam Smith.