How Do Factor Endowments Impact a Country's Comparative Advantage?

SUMMARY
The purpose of the study is to determine the effect of factor endowments on comparative
advantage of countries. Factor endowments with the availability of land, labor, capital are more
prevalent in economies with more capital and more diverse commodity streams. Factor
endowments describes with the comparative advantage. CA described how, under free trade, the
worker-producer would give up some but receive greater benefit with respect to the relative
abilities they were granted. The opportunity cost also described in the same manner. But, once
PPF curves are equal, then the opportunity cost-benefit ratio of various countries is constant.
International trade has no advantages here.

COMPARATIVE ADVANTAGE
Comparative advantage, which produces the most products and services with the fewest
resources implemented may suggest that world production growth. Some economists have
compared it to David Ricardo's concept of comparative advantage to nineteenth Century
(Morales, 2021).

Ricardo recognized the products and services that nations must manufacture and proposed that
they would rather specialized by allocating limited resources to create products and services for
something they have a comparative advantage. Cost advantage can be categorized into two types:
absolute and comparative (Ciuriak, 2021).

The idea of absolute advantage denotes when one nation is more effective or more competitive
than another, while the concept of comparative advantage deals with how competitive a nation is
relative to the others (Thompson, 2021).

Example:

To illustrate how the idea of comparative advantage perhaps in the modern world, let's look at
the scenario of a nation only making two different types of vehicles: our country specialises in
cars, and our neighboring country in trucks.
A has the opportunity to expand its total capacity by using all its capital, country A uses all of it,
and producing 30 million cars or 6 million trucks, country B does not. A rough sum of this can
be made up into a chart. Country B has the absolute advantage in the production of both,
although it has a competitive advantage in the trucks, since it is better at the production of those
two items. Country B is 3.5 times higher in their truck offerings, and just slightly worse in their
vehicle offerings.
To sum it up, however, the biggest advantage and the largest difference are all in truck
manufacturing, so Country A should concentrate on trucks and vehicles, while Country B
concentrates on cars.

Taken from this economic principles, which states that nations implement the concept of
comparative advantage, their combined output will be greater than self-sufficiency, and
allocating resources will favor manufacturing of both products. For instance, if both countries A
and B distribute resources equally between the two products, the combined production is: Cars =
15 + 15 = 30; Trucks = 12 + 3 = 15, hence, total production is 45m items.

OPPORTUNITY COST

Countries gain a competitive advantage from their ability to manufacture products with less
capital and at a lower opportunity cost. A PPF's curve indicates the opportunity cost of output.
Increased output of one thing results in decreased output of another (Poston & Hamid, 2021).
The curve represents that fall in output Y will be rise in output of X.
In contrast to Country B, Country A makes less of an absolute loss than a relative one.
Differentiating between two production levels would increase the opportunity cost of trade, but
higher productivity in either country will increase total production (Bellemare, 2018). A
country's competitive advantage is determined only by varying its speed of response to change.
And trade then serves the country's benefit.

Identical PPFs

Once PPF curves are equal, then the opportunity cost-benefit ratio of various countries is
constant. International trade has no advantages here.
HOW DO FACTOR ENDOWMENTS IMPACT A COUNTRY'S COMPARATIVE
ADVANTAGE?

When the opportunity cost of specialization is smaller than the other countries, a competitive
advantage occurs. The presence of a competitive advantage is influenced by factors such as
availability, efficiency, wage costs, land costs, and capital costs. Other variables, such as a highly
diversified investment portfolio or productivity improvements, can also affect a country's
competitive advantage in real world terms (Spilimbergo et al., 1999). For a country to have the
competitive advantages, there are three factors: land, labor, and capital, plus the capital it's
wealth.