Intro to International Trade


Chapter 21 - Why do countries trade?

International trade is the exchange of goods and services betwee countries. 

The gains from international trade:

1. Lower prices

- the ability to buy goods and services from other countries for a lower price

- different prices caused by access to natural resources, quality of capital, quality of labour force, or level of technology

- this is the main gain from international trade

2. Greater choice

consumers can choose from products that may only be produced in other countries

3. Differences in resources

countries can buy resources that they need but don't naturally posess

- resources may be used to produce other products or simply for survival

4. Economies of scale

- international trade causes the size of the market (and therefore demand) to increase

- level of production and size of production units will also increase allowing economies of scale


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