1. International Business
Comparative Advantage model of Trade theory
Jasmeet Singh

2. Comparative Advantage
Ability to produce at opportunity cost
Absolute Advantage
Ability to produce at resources another country
Opportunity Cost
#the value of the next best alternative foregone as the result of making a decision
Gain
OC = Sacrifice
Sacrifice
Gain
# wikipedia.org

3. Y Y
Jute India Jute Bangladesh
10 8
A1 A2
5 4
4 2
X 4 X
8
Sugar Sugar
Oppt. Cost = Sacrifice /Gain or X/Y or Y/X (easier way)
So to grow 10 tones of Jute, India have to give up 8 tones of Sugar thus 10/8 =
5/4 (point A1) and to grow8 tones of Jute, Bangladesh have to give up 4 tones
Of Sugar thus 8/4=4/2 (point A2).
Values are in tones

4. Y Y
Jute India Jute Bangladesh
10 8
A1 A2
5 4
Thank you
4 2
X 4 X
8
Sugar Sugar
Oppt. Cost = Sacrifice /Gain or X/Y or Y/X (easier way)
So to grow 10 tones of Jute, India have to give up 8 tones of Sugar thus 10/8 =
5/4 (point A1) and to grow8 tones of Jute, Bangladesh have to give up 4 tones
Of Sugar thus 8/4=4/2 (point A2).
Values are in tones