Economics Comparative Advantage Questions
Technological progress refers to advancements in technology that lead to increased efficiency and productivity in the production process. In relation to comparative advantage, technological progress can affect the comparative advantage of a country or firm by improving their ability to produce goods or services more efficiently than others.
When a country or firm experiences technological progress, it can reduce the costs of production, increase output, and improve the quality of goods or services. This can result in a comparative advantage as they can produce goods or services at a lower opportunity cost compared to other countries or firms.
For example, if a country develops new machinery or adopts advanced production techniques, it can produce goods more efficiently and at a lower cost. This technological progress can give the country a comparative advantage in the production of those goods, allowing them to specialize in their production and potentially export them to other countries.
Overall, technological progress plays a crucial role in shaping comparative advantage by enhancing productivity and efficiency, leading to improved competitiveness in the global market.