Since
the resources are difficult to move between nations, the goods must move.
The nations have abundance of land relative to labour will concentrate on “land
intensive” commodities such as wheat, meat etc. They can exchange these goods
with “labour intensive” or “capital intensive” producing countries
or vice versa.
Therefore, international trade takes place because of the difference in the
Therefore, international trade takes place because of the difference in the
(1)
Availability of resource endowments
and
(2)
Their Productive efficiency,
both labour and capital.
International
trade involves the exchange of goods and services across international
boundaries. International trade
is different from Home trade because of many reasons.
(1)
There may be restrictions by
governments or international organizations on the movement of products.
(2) Some countries may not allow the products to be sold outside their countries.
(2) Some countries may not allow the products to be sold outside their countries.
(3)
Communication may be difficult
during the trading process.
(4)
Higher costs due to greater transport
cost.
(5)
Need to translate advertising message
and related information to concerned language.
(6)
Explore and keep up-to-date information
regarding the changes in taste and fashion in the foreign markets.
(7)
The requirement to change currencies
of concerned countries.
(8)
Differences in technical and legal
requirements.
(9)
Extra risk involved including
wars, famines etc.
Firms
and countries specialise and involve in international trade because they
believe that the benefits outweigh the
costs. The overall benefit, that is, by the use of division of
labour the world output, would increase and hence raises the material
standard of living of the people.
Firms (1) benefits by way of access to larger markets enabling them to take greater advantage of economies of scale.
(2) They can purchase raw materials and components cheaply.
Consumers (1) benefits that they are able to get more choice from abroad [purchase goods not made in their own counties]
(2) greater access to variety of products
(3) can benefit from increased competition in the form of lower price and better quality.
Firms (1) benefits by way of access to larger markets enabling them to take greater advantage of economies of scale.
(2) They can purchase raw materials and components cheaply.
Consumers (1) benefits that they are able to get more choice from abroad [purchase goods not made in their own counties]
(2) greater access to variety of products
(3) can benefit from increased competition in the form of lower price and better quality.
International
trade takes place because of the difference in the availability of resource
endowments and their Productive efficiency, both labour and
capital. Firms and countries specialize and involve in
international trade because they believe that the benefits outweigh the
costs.
The benefit derived by countries from international trade may be considered and studied using
(1) The concept of absolute advantage and
(2) Principle of comparative cost.
The benefit derived by countries from international trade may be considered and studied using
(1) The concept of absolute advantage and
(2) Principle of comparative cost.
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