Sources of Economics Comparative Advantage - Myassignmenthelp.Com

Question: Discuss about the Sources of EconomicsComparative Advantage. Answer: Sources of Comparative Advantage Essentially, comparative advantage implies the ability of firms, industries or countries to produce a commodity or service incurring low opportunity costs as compared to their competitors. Specifically, the availability of natural resources can offer a comparative advantage for the country or firm dominating the natural resource (sources , 2018).In addition, the more expansive a firm or country enjoys large economies of scale could place them in a position to enjoy comparative advantages. In the sense that, a domestic market with large economies of scale is likely to attract more investments which result in more revenue for the government and private business owners while expanding employment opportunities and boosting consumer welfare. Further, technological advancement can offer opportunities for comparative advantages for the technologically advanced firm or country over its competitors. In the sense that, a firm adopting current or superior technology is likely to produce surplus goods and services at lower costs thus maximizing its revenue. Typically, superior technology translates into quality products and services which is very easy to penetrate new markets due to the uniqueness of the product thus increasing revenue for the stakeholders against its competitors. Moreover, factor endowments are considered comparatively advantageous in certain situations. For instance, a nation with highly skilled human capital is likely to export it and import less skilled imports according to the Heckscher-Ohlin Model (Walker, 2013).In addition, preferences are considered to offer comparative advantages for the partaking stakeholders. This is because in the event that a given product or service is preferred as compared to its competing product or service implies that the preferred business operator has a comparative advantage in the sense that most of his or her goods will be consumed as compared to its competitors. Explain how comparative advantage can change over time Following the dynamic nature of comparative advantage, there's a likelihood of various changes over time. Particularly, the change in technology can shift the advantages previously enjoyed by a firm in the sense that with the development of superior technology, a firm implementing inferior technology will lose its comparative advantage if it doesn't advance or adopt more superior technology (Riley,2015).Also, in the event that theres depletion of the natural resource which was key in providing the comparative advantage of a given firm or country, the said firm or country will lose this advantage due to the fact that it may need to incur extra costs such as transportation, purchase of the natural resource to keep its operations afloat(Economics Online,2018). In addition, there will be a change in the comparative advantage of a firm or country in the event that there's a drastic change of its factor endowments. Specifically, in the event that a given country has a large portion of its human capital comprising of the aged population. Usually, a youthful labor force is considered efficient and effective due to their physical abilities thus making a firm or country with an aging population losing its productivity comparative advantage. Collectively, the changes in the world prices, opportunity costs (social) of local production factors and technology continue to influence the changes in the comparative advantage of the different business operators in the sense that they influence the demand and supply of goods and services. The dynamic nature of comparative advantage is inevitable. References Economics Online. (2018).Comparative Advantage. Economics Online. Retrieved from https://www.economicsonline.co.uk/Global_economics/Comparative_advantage.html Riley. G. (2015).Sources of Comparative Advantage.Tutor2u.net.Com.Retrieved from https://www.tutor2u.net/economics/reference/sources-of-comparative-advantage Sources of Comparative Advantage. (2018).Encyclopedia Britannica. Retrieved from https://www.britannica.com/topic/international-trade/Sources-of-comparative-advantage Walker, R. J. (2013).Economics 448: Comparative Advantage. The University of Wisconsin. Retrieved from https://www.ssc.wisc.edu/~walker/wp/wp-content/uploads/2013/09/E448Lec3slides.pdf