Question

Need a 500 word summary highlighting the important concepts discussed in the following article:-

School Brief. The Miracle of Trade by The Economist 27January 1996.

Answer 1

The most popular and most dangerous of all elementary economic fallacies is claiming that an unproductive economy may be harmed by free trade.

For example if one country is good in manufacturing shirts and other country is good in manufacturing jeans then the total output can be increased by first country by focusing on manufacturing shirts and second country focusing on manufacturing jeans in this way both country can use each other market to export things. This is a advantage point.

Each country is specialised in manufacturing certain product better than other country where competition come in between and country try to make better then the other and weaker quality is thrown out of market. This can effect the market if both Country produce same goods demand will decrease and export will decrease.

This is not economic theory, a country has a
comparative advantage where its margin of superiority is greater than other , or its margin of inferiority smaller than other . Carl Lewis, one imagines, is better than Bill Clinton at both cricket and tennis-that is, he has an absolute advantage in both. Even so, the president has a comparative advantage in tennis, in which his margin of inferiority is more is presumably smaller. Conversely, Mr Lewis's comparative advantage is in cricket, in which his margin of superiority is greater.

For a example in a global economy comprising two countries, India and South africa. Each makes two goods, bread and soft drinks ; each has 100 workers, and labor is required for production. If all 100 workers are making packets then it will make 100 packets in a day and if all 100 workers makes bottles then it will make 100 bottles in a day. And 50 - 50 workers makes bottles and packets then 50 bottles and 50 packets will be made in a day which is of no use if it is not consumed so the company should manufacturer goods according to the demand in market.