Theory Of Trade

The basis of globalization is trade which has greatly been assisted with modern technology, faster and more reliable transportation methods, more transparent financial transactions and also easier and clearer communication techniques.

What makes trade popular is the creation of surplus, where all trading partners can consume more AFTER trade as compared to what they could consume in the absence of trade. Trade enable people to specialize, which results in reduced resource wastage as more can be produced using the same resources, hence allowing all partners to consume more.

Theory of Comparative Advantage explains the same above concept using numerical examples and graphs.