Economics Week 8 International Trade Simulation

Topics: International trade, Economics, Comparative advantage Pages: 3 (1077 words) Published: July 30, 2011
Assignment: International Trade Simulation
XECO/212
University of Phoenix
David Cullipher

The economy of Rodamia relies on three main areas: agriculture, industry and services. The country is surrounded by neighbors who produce similar and different products. Uthania is specialized in making chocolate and confectionary, but also produces goods such as minerals, coals and corn. On the other hand, Suntize is a tourist attraction which is good at producing electronic goods. Lastly, Alfazia is an agrarian economy and produces goods like corn, rice and cotton.

In this age of globalization, the economies of the world are becoming more integrated and countries are increasingly engaging in international trade. Rodamia is no exception. Its most obvious trading partners will be Suntize, Alfazia and Uthania. International trade occurs because different countries have different comparative advantage. Comparative advantage arises when countries experience different opportunity costs when producing the same goods. For example, China has comparative advantage in producing agricultural goods when compared to a country like Singapore. This is because China is a large country with a large population and a lot of land available for plantation. On the other hand, Singapore is a small country with scarce land and a small population. As such, China is able to produce more agricultural products at a cheaper price with its cheap labor, and can devote the rest of its money to production of other goods. On the other hand, Singapore has to give up the production of a lot of goods should it decide to devote its land to agriculture. Therefore, this shows that China has a comparative advantage when it comes to the production of agricultural goods. On the other hand, absolute advantage occurs when a country is able to produce more products using a lower amount of resources when compared to another country. For example, America is able to produce more cars using fewer resources than...
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