Classical Theory of International Trade

Classical Theory of International Trade:

The classical economist like Adam Smith and David Ricardo developed a theory of international trade called the classical theory of international trade.

Adam smith analyzed the causes for and the benefits of international trade in terms of absolute cost advantage, and David Ricardo analyzed the causes for and the benefits of international trade in terms of comparative cost advantage. So, Adam smiths analyses of the theory of international is called theory of absolute cost advantage, and David Ricardo’s analysis of the theory of international trade is called the theory of comparative cost advantage.

Adam Smith’s theory of Absolute Cost Advantage