The basis for international trade is embedded in the principle of
Answer Details
The basis for international trade is embedded in the principle of comparative advantage. This principle states that countries should specialize in producing the goods and services they can produce most efficiently and trade with other countries for the things they can't produce as efficiently.
For example, imagine that there are two countries, Country A and Country B, and both can produce two goods: apples and bananas. Country A can produce 100 apples or 80 bananas in a day, while Country B can produce 80 apples or 100 bananas in a day. According to the principle of comparative advantage, Country A should specialize in producing apples, and Country B should specialize in producing bananas, and then trade with each other. This way, both countries can benefit from having more of both goods than if each tried to produce both on their own.
In a nutshell, comparative advantage is the idea that countries can benefit from trade by specializing in what they are best at and trading with others for the things they are not as good at producing.