International Trade

A summary of International trade (a macro topic).

HideShow resource information
Preview of International Trade

First 107 words of the document:

James Fortson
INTERNATIONAL TRADE
INTRODUCTION TO GLOBALISATION
TRADE
ABSOLUTE ADVANTAGE
When one country/firm specialises in the production of one good over another ­ there is a benefit of trade for
each.
Problems:
Trading costs: Transport costs, tariffs, exchange rates, logistical issues which increase firms' costs of
production.
Good must be in demand: if nobody is buying the good then it will have no/little output, leading to less
economic growth etc.
COMPARITIVE ADVANTAGE
The ability to produce a good at lower cost, relative to other goods, compared to another country.
Page 1

Other pages in this set

Page 2

Preview of page 2

Here's a taster:

James Fortson
Problems:
Consumers like choice.
You assume that both are homogenous products, but there are different brands ­ consumer tastes and brand
loyalty. Consumers will only buy (and import) something they like.
Constant returns to scale.
In reality there are economies and diseconomies of scale. If you produce more then production will increase
exponentially (economies of scale). However, as output rises, the greater the opportunity cost lower
efficiency.…read more

Page 3

Preview of page 3

Here's a taster:

James Fortson
To promote domestic standards (of e.g. food Could widen the inequality gap since it is often
safety, the environment, and labour market the developed countries that form trading
conditions. blocs.
To raise revenue.…read more

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all resources »