Answer to Question #307563 in Finance for neika

Question

How does the search for market niches by British firm help illustrate the theory of comparative advantage?

Answer 1

What you perform best while giving up the least is referred to as comparative advantage. For instance, I f yo are an excellent plumber and at the same time a good babysitter, plumbing is therefore your comparative advantage. This is due to the fact that you will earn more money as a plumber. A comparative advantage emerges in economics when one nation can provide a product or service at a reduced opportunity cost than another. David Ricardo, a political economist, is credited with developing the concept of comparative advantage in his work Principles of Political Economy and Taxation (1817). The UK enjoys a significant comparative advantage in trade services, which is increasing faster than goods trade internationally. In important rising market regions like Asia, Africa, and the Middle East, medium-term development prospects are still promising. The United Kingdom maintains a stronger position in global services trade than in goods trade, accounting for more than 7% of global service exports contrasted to just over 2.5 percent of goods exports.

With the UK having to account for roughly 3.5 percent of global GDP, it is fair to say that it pummels below its weight in goods trade but substantially above its weight in services.