REVISION – Short Questions –
International Trade
Define
international trade?
International
trade involves the exchange of goods and services across international
boundaries (trade of goods and services between countries). It is also
called foreign trade.
What
are the basic reasons for international trade?
International trade takes place because of the difference in;
(1)
Availability of resource endowments and
(2)
Their
Productive efficiency, both
labour and capital.
What
are the techniques of production used based on the availability of resources?
Based
on the availability of resources nations use “land intensive”, “labour
intensive” or “capital intensive”.
What
are the benefits of international trade?
International
trade enable;
(1)
The
consumers to get goods and services which are not produced in their own
country.
(2)
The
producers can sell their products which are in excess of consumption with in
their country.
(3)
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.
What are the basic differences
between home trade and international trade?
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.
(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.
What
are the specific benefits to the firms involved in international trade?
The benefits to the firms are,
(1) Access
to larger markets enabling them to take greater
advantage of economies of scale.
(2) They can purchase raw materials and components cheaply.
What are the specific benefits to the consumers from
international trade?
(2) They can purchase raw materials and components cheaply.
The benefits to the consumers are,
(1)
Getting more choice from abroad [purchase of goods that are not made in their
own country]
(2) greater access to variety of products
(3) can benefit from increased competition in the form of lower price and better quality at their home country.
How
do we study the benefits derived from international trade to countries?
(2) greater access to variety of products
(3) can benefit from increased competition in the form of lower price and better quality at their home country.
The
benefits derived by countries from international trade may be studied using;
(1)
The concept of absolute advantage,
(2)
Principle of comparative cost.
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