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5. Trade models based in comparative advantage do not explain why countries export and import the...

5. Trade models based in comparative advantage do not explain why countries export and import the same goods. Assess this statement and provide an alternative model of trade which might explain this phenomenon.
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Answer #1

Trade models related to comparative advantage only partially explains why a nation exports the goods that they are exporting and the other goods that they are importing. The simple reason that this model gives that these goods are produced at a cheaper cost in the nation as compared to other economy and that is why the nations are exporting it.

The other model H-O model explains why a nation is having a comparative advantage in the production of the goods that they are producing , it is also known as factor abundance model because it is the abundance of the factor o production that is allowing the nation to produce goods at a cheaper rate and export.it.

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