Research Paper on:
Eight Business Concepts and Definitions

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maximise its resources. Adam Smith we see that he stipulates that each nations should concentrate on producing goods where they have the absolute advantage (Thompson, 1998). This means that they  should produces the goods that they can produce in a more effective manner than any other nation. Conversely, in international trade they should also import any commodity where they have  the absolute disadvantage, that is where they can only produce the commodity at a high cost than any other nation (Thompson, 1998).This is classical trade theory. However, this does  not explain many patterns of trade, as many countries may have the same absolute advantage. David Ricardo developed an alternative theory. The theory of comparative advantage. Although this sounds similar  it is a very different approach. Ricardo states that countries should make their decision of what commodities to produce and export by reference to that which has the smallest absolute  disadvantage and import that commodity where the absolute disadvantage is the greatest. These are the two main trade theories. Contratrade (bartertrade) This is a system of trade that is  still prevalent in many rural undeveloped areas. Trade takes place between goods without the use of currency. This may be as simple as a chicken payment for a sack of  potatoes, but it may also take place in a far more complex setting, such as the use of a community where trade creates and costs credits that are not a  real currency. These are often hidden economic transactions. However in many countries they are still technically taxable. International markets Where a company wants to exploit an international market but  dies not want to export of make use of direct foreign investment (DFI) there are other alternatives. The most common are likely to be franchises or licensing, where others take