What are three principal trade theories? How do these theories apply to the pattern of global trade? Are they still useful in our understanding of the dynamics of today?© BrainMass Inc. brainmass.com June 3, 2020, 9:24 pm ad1c9bdddf
The three principal trade theories are
1. Theory of absolute advantage
2. Theory of comparative advantage
3. Classical trade theory
According to theory of absolute advantage, a country has an absolute advantage over the others if it is able to produce more of a product or service with the same amount of resources or the same amount of a good or service with fewer resources. This occurs because of the existence of better resources for producing a particular product or service.
The solution lists the three principal trade theories followed by a paragraph of explanation of each. Conclusions are reached in evaluating each theory.