Comparative Advantage

In: Business and Management

Submitted By jbanegaza1
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Business conclusion that compares the costs and benefits of manufacturing a product or product component against purchasing it. If the purchase price is higher than what it would cost the manufacturer to make it, or if the manufacturer has excess capacity that could be used for that product, or the manufacturer's suppliers are unreliable, then the manufacturer may choose to make the product. This assumes the manufacturer has the skills and equipment necessary, access to raw materials, and the ability to meet its own product standards. A company who chooses to make rather than buy is at risk of losing alternative sources, design flexibility, and access to technological innovations.

Read more: Basically blab la is a business resolution adopted by the firms to determine if it is financial sound to produce the item or to purchase the item

Letters of credit are also used on financial trade to provide the beneficiary with the promise of pay or as a contract for a sale.

Cornelio reayna
Professor Patrick coolt
Principles of Management AMM 103
October 16, 2005

Absolute Advantage and Comparative Advantage According to the classic model of international trade introduced by David Ricardo (19th-century English economist) to explain the pattern and the gains from trade in terms of comparative advantage, it assumes a perfect competition and a single factor of production, labor, with constant requirements of labor per unit of output that differ across countries. The basis for trade in the Ricardian model is the differences in technology between countries. As a result, there are two different ways to describe technology differences: the first method, called absolute advantage, is the way most people understand technology differences; and the second method, called comparative advantage,…...

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