Comparative advantage is when companies have the opportunity to produce a product at a lower cost when compared to the price of production in other countries. Companies across the spectrum use this notion to sell products at a relatively lower cost. This helps them increasing trade and commerce between the countries (Shaikh, 2007) in this scenario the companies often gains leverage and broader consumer base. This leads to increase of cash flow and sales of flagship products of the individual enterprises. Owing to the increase of cash flow in the commercial enterprises the economics and GDP of the country also increases. It has been observed that there is increase in volumes in trade in cases that the procuring amount of the supplies and the products are relatively lower. Companies are able to produce products and provide services at a much lower cost. This causes increase of cash flow. The net capital used for production process is reduced considerably. Apart from this it is typical for government to reduce or not impose any import taxes. This leads to more people buying products.
This will be managed by increase in production in the domestic imports; there will be increase in economic welfare of the society. This in turn will cause net gain for the government and the subsequent industries. Commercial enterprises can focus on expansions of the market base. They can also increase their product diversification. This leads to overall productivity in the nation. There will be significant currency difference that has been observed in this scenario. Companies can use favourable currency difference to increase the economic flow of goods. By increasing the volume of trade and increasing the consumer base there is more economic activities within the country. This trade caters to larger consumer based due to which there is more currency flow within the country. This leads to increase in economic activity and subsequent purchasing power of the individuals in the countries. This purchasing power directly leads to increase in disposable income of the people. In this scenario the people start to spend more in consumer products. This leads to more positive spiralling of events.