International trade
- This is a preview of the essay.
To view the full text you must login!
International Trade
To see why international trade is important, just take a look at the labels of your clothes, shoes, on food products you buy and on the car that you drive. The key to all trade is specialization you do what you do best and exchange your service for money which is used to buy the specialized goods from others. To see which goods a country has specialized in, we take a look at its exports the goods and services that it produces and sells to other nations.
A country has absolute advantage when it is able to produce more of a given product than any other country can.
A country has a comparative advantage when it has the ability to produce a product relatively more efficiently , or at a lower opportunity cost.
The concept of comparative advantage is based on the assumption that everyone will be better off producing the products that they produce relatively best. This applies to individuals, companies, states, and regions as well as to nations. The final result is that specialization and trade increases total world output.
Although international trade can bring many benefits, some people object to it because it can displace selected industries and groups of workers in the own country. Historically, trade has been restricted in two major ways...