Compare the Classical Theory of international trade with Modern Theory

1.	Compare the Classical Theory of international trade with Modern Theory of International trade?
Answer» Classical Theory of International Trade: 1. The classical theory explains the phenomenon of international trade on the basis of labour theory of value. 2. It presents a one factor (labour) model. 3. It attributes the differences in the comparative costs to differences in the productive efficiency of workers in the two countries. Modern Theory of International Trade: 1. The modem theory explains the phenomenon of international trade on the basis of general theory of value. 2. It presents a multi – factor (labour and capital) model. 3. It attributes the differences in comparative costs to the differences in factor endowments in the two countries.

Compare the Classical Theory of international trade with Modern Theory of International trade?

Answer»

Classical Theory of International Trade:

1. The classical theory explains the phenomenon of international trade on the basis of labour theory of value.

2. It presents a one factor (labour) model.

3. It attributes the differences in the comparative costs to differences in the productive efficiency of workers in the two countries.

Modern Theory of International Trade:

1. The modem theory explains the phenomenon of international trade on the basis of general theory of value.

2. It presents a multi – factor (labour and capital) model.

3. It attributes the differences in comparative costs to the differences in factor endowments in the two countries.

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