Exam Paper Econ
Economics is rich in theory. For economists, theory provides a framework for understanding and analysing economic phenomena. There are several types of theory to provide some insight into the trading activity subject to a nation and industry. For instant Revealed Comparative Advantage, it is a theory or some call an index for indicating how that activity compares to the activity of one or more similar entities. More importantly the initial meaning of this approach is to gain some good understanding of how that export performance accounts for the total exports of certain goods within the world market and how they compare to others who also operate in the same type of exports. Identifying the revealed comparative advantage of a nation or industry will exhibit the trade flow is increasing or decreasing compare with past periods. More importantly this essentially a step to take into before the determination of which or what products to export and import and from this trade activity might be established. The revealed comparative advantage is commonly used in international economics for calculating the comparative advantage or disadvantage of a country in certain type of goods or services .The RCA is based on the Ricardian Model (comparative advantage concept). The Ricardian model is based on technological differences across countries, which result in differences in productivity.
According to the Heckscher &Ohlin theory (H-O theory), countries with different resources or factor endowments trade each other and a country’s comparative advantage is determined by its relative factor scarcity relative to a set of countries. It is the difference in technology and/or endowments according to these early trade theories that are the underlying causes of international trade. The comparative advantage concept is still popular although some other new models have emerged. New trade theories give a central role to increasing profitability, product differentiation,
According to the Heckscher &Ohlin theory (H-O theory), countries with different resources or factor endowments trade each other and a country’s comparative advantage is determined by its relative factor scarcity relative to a set of countries. It is the difference in technology and/or endowments according to these early trade theories that are the underlying causes of international trade. The comparative advantage concept is still popular although some other new models have emerged. New trade theories give a central role to increasing profitability, product differentiation,
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