“The international flow of goods helps compensate for the international immobility of resources.” Analyze and explain.

What will be an ideal response?

If resources were as mobile as goods, they would flow across borders until cost conditions were equalized throughout the world and there would be no need for specialization and trade. However, it is clear that this is impossible. Even human resources are somewhat immobile and natural resources are not equally endowed in each nation. Therefore, cost conditions differ from nation to nation, and some nations can produce some things relatively more cheaply than others. This leads to specialization and exchange according to the principle of comparative advantage. It is the goods that are bought and sold across borders rather than the resources, and this enables countries to be compensated for the differences in the cost of production.