Which concept is known as the birth of modern economics?

Which concept is known as the birth of modern economics?

• A. Mercantilism
• B. Absolute Advantage
• C. Comparative Advantage
• D. Resource Mobility

Answer: (B)

The concept recognized as the birth of modern economics is the theory of Absolute Advantage, attributed to economist Adam Smith. In his seminal work, "The Wealth of Nations," published in 1776, Smith outlined this concept, emphasizing that nations should produce goods for which they have a natural efficiency or advantage in production compared to other nations. This marked a pivotal shift in economic thought, moving away from the mercantilist focus on trade surpluses and gold accumulation towards the idea that trade can benefit all parties involved if they specialize according to their strengths. Absolute Advantage posits that if a country can produce a good more efficiently than another country, it should specialize in that good and trade with others. This laid the groundwork for the subsequent development of other economic theories, including Comparative Advantage by David Ricardo, which further refined the principles of trade and efficiency. However, it is Absolute Advantage that represents the foundational idea that started a new era in economic analysis and policy.

The concept recognized as the birth of modern economics is the theory of Absolute Advantage, attributed to economist Adam Smith. In his seminal work, "The Wealth of Nations," published in 1776, Smith outlined this concept, emphasizing that nations should produce goods for which they have a natural efficiency or advantage in production compared to other nations. This marked a pivotal shift in economic thought, moving away from the mercantilist focus on trade surpluses and gold accumulation towards the idea that trade can benefit all parties involved if they specialize according to their strengths.

Absolute Advantage posits that if a country can produce a good more efficiently than another country, it should specialize in that good and trade with others. This laid the groundwork for the subsequent development of other economic theories, including Comparative Advantage by David Ricardo, which further refined the principles of trade and efficiency. However, it is Absolute Advantage that represents the foundational idea that started a new era in economic analysis and policy.