Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries. Firstly, not having a comparative advantage in these 2 good types means that they are made ‘cheaper’ abroad. This essentially means that prices of these goods from these countries are cheaper than the domestically produced equivalents, and hence the demand for the foreign versions increases. This means that imports rise- which is bad for the UK economy, because imports are a leakage from our economy meaning it’s not good for the UK economy as there is less cash flow in the economy and potential economic growth decreases. Furthermore imports increasing mean that aggregate demand would likely shift to the left too. This graph shows the implications of AD shifting to the left

However, the UK economy is growing (0.7% growth between April and June 2015), and thus demand for these low-value added ‘inferior’ goods such as cheap t shirts from a supermarket is falling- and demand for more ‘normal’ and ‘luxury’ goods- of which the UK produce very well in the form of higher-added value goods rises, and thus the circular flow of income may not be as affected a initially thought, a sin theory imports won’t actually increase by as much as first presumed, meaning the UK should not be as concerned as first thought. Secondly, the UK should possibly be concerned due to the increasing global integration of the global economy. We do currently produce these aforementioned types of goods, but with the economy further integrating the competition is becoming more global, i.e. we are competing with more and more economies across a wider-scale, and we become outcompeted due to our production costs- meaning the UK should be concerned about not having a