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International Economics — Economics STD 12 — Question

Tamilnadu BoardEnglish MediumSTD 12EconomicsInternational Economics3 Marks
Question
Write Ricardo’s Theory of Comparative Cost Advantage Assumptions/
✓

Answer

Assumptions:
  1. There are only two nations and two commodities (2 × 2 model)
  2. Labour is the only element of cost of production.
  3. All labourer s are of equal efficiency.
  4. Labour is perfectly mobile within the country but perfectly immobile between countries.
  5. Production is subject to the law of constant returns.
  6. Foreign trade is free from all barriers.
  7. No change in technology.
  8. No transport cost.
  9. Perfect competition.
  10. Full employment.
  11. No government intervention.

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