The theory states that even if a country can produce both commodities more than the other there is still the need to specialze in the production of a particular commodity of which she has the lowest cost advantage and exchange it for the other, for trade between countries to be mutually benefitial."all things being equal".
ASSUMPTIONS:
1- there are only two countries in the world.
2- there are only two commodities.
3- trade between two nations are not restricted.
by; ICE
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