Story: Economic thought

Comparative advantage

Economist David Ricardo explained the theory of comparative advantage in his 1817 book On the principles of political economyand taxation using an example of England and Portugal. Portugal produces wine and cloth with less labour than is needed in England. Yet it is productive for Portugal to produce more wine than cloth, and for England to produce less wine than cloth, because more of both goods is produced. Both countries trade and both gain as the quantity of each good produced rises.

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How to cite this page:

Gary Hawke, 'Economic thought - Single tax', Te Ara - the Encyclopedia of New Zealand, (accessed 29 September 2020)

Story by Gary Hawke, published 11 Mar 2010