Economics Comparative Advantage Questions
Technology plays a crucial role in determining comparative advantage. It refers to the knowledge, skills, and techniques used in the production of goods and services.
Technological advancements can lead to increased productivity and efficiency, allowing countries to produce more output with the same amount of resources. This can result in a comparative advantage in the production of certain goods or services.
For example, if a country has advanced technology in the production of automobiles, it can produce cars at a lower cost and higher quality compared to other countries. This technological advantage gives the country a comparative advantage in the automobile industry.
Furthermore, technology can also affect the mobility of factors of production. It can enable the transfer of knowledge and skills across borders, allowing countries to specialize in industries where they have a comparative advantage.
However, it is important to note that technology is not static and can change over time. As technology advances, the comparative advantage of countries can shift. Therefore, countries need to continuously invest in research and development to maintain or improve their technological advantage and comparative advantage in the global market.