The Richardian theory of International trade states that there is trade between countries because every country’s labor and technology are different and that gives one country an advantage over the other and this is why companies share their products of specialization with each other. Each of them can gain from their trade because of what they have. The main assumptions of this theory are:
The markets are perfectly competitive and the amount of resources used would determine the goods produces. This is called Perfect return to sales and means that the output would increase by the same ratio by which resources increase. Another assumption is that the markets are independent and there is no intervention by the government.
The markets are perfectly competitive and the amount of resources used would determine the goods produces. This is called Perfect return to sales and means that the output would increase by the same ratio by which resources increase. Another assumption is that the markets are independent and there is no intervention by the government.