Trade is the transfer of ownership of goods and services from one person to another. Nowadays in our changing world International and Domestic Tradehave had a strong impact on the society.
If we take a look International Trade is the exchange of capital, goods and services across international borders. This type of trade is quite necessary in our developing world, but on the other hand we have Domestic Trade which is the exchange of goods and services within the same country.
The differences between them? Unlike International Trade, Domestic Trade is carried out inside the same nation, without crossing its borders.
International Trade
International Trade is the exchange of goods and services between nations. This type of trade gives rise to a world economy, in which prices or supply and demand, affect and are affected by global events. The main objective of International Trade is to offer the products available in a country to another that is not available in order to satisfy the domestic demand like food, clothes, oil etc.Any resource, intermediate good, or final good or service that buyers in one country purchase from sellers in another country is an import, and any intermediate good, or final good that producers in one country sell to buyers in another country is an export; a nation that exports more will grow stronger. If a country cannot efficiently produce an item, it can obtain the item by trading with another country that can. As it opens up the opportunity for specialization (a method of production in which companies focus on a limited number of products and services which they can do best) and therefore more efficient use of resources, International Trade has potential to maximize a country’s capacity to produce and acquire goods. International Trade also has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free Trade is the type of market in which goods and services cross borders freely, unrestrained by tariffs or any other sort of barrier to trade, and protectionism exists in many different forms, but the most common are tariffs, subsidies, quotasand regulations that discriminate against foreign businesses. These strategies attempt to correct any inefficiency in the International market.
Global economics, global exchange: Video outline.
Main idea: There are several reasons why specialization and trade are beneficial for a country Key concepts: Comparative advantage: Emphasizes the differences in countries resources and productivity levels Economy of scale: Is the degrade of the scale of production, making the production more efficient or lower cost per unit of output Example
Countries
Products
Reasons for specialization
PAKISTAN
Rice and Mangoes
Warm weather
SWEDEN
Paper and steel
Cold weather, forests and
iron
Main idea: In order to have a Comparative Advantage in a country, it must be able to produce at a lower opportunity cost, relative to another country Key concepts: Opportunity cost: Forgone opportunity to produce another good An example of opportunity cost is: If you decided to buy a CD (10$) you wouldn’t be able to go out for dinner or buy a T-Shirt, because you have decided to pay for the CD price, already instead of buying a T-Shirt Complete the chart with the corresponding information
Country
No. jeans produced
No. cars produced
Opportunity cost
UNITED STATES
10
20
2 cars, one pair of jeans
CHINA
6
6
1 car, one pair of jeans
UNITED STATES has a comparative advantage in AUTOMOBILES CHINA has a comparative advantage in JEANS
Main idea of: Productivity Factors and their determinants
Key concepts:
Hechscher and Ohlin theory looks the determinants of relative labour productivity
TRADE
Trade is the transfer of ownership of goods and services from one person to another. Nowadays in our changing world International and Domestic Trade have had a strong impact on the society.
If we take a look International Trade is the exchange of capital, goods and services across international borders. This type of trade is quite necessary in our developing world, but on the other hand we have Domestic Trade which is the exchange of goods and services within the same country.
The differences between them? Unlike International Trade, Domestic Trade is carried out inside the same nation, without crossing its borders.
International Trade
International Trade is the exchange of goods and services between nations. This type of trade gives rise to a world economy, in which prices or supply and demand, affect and are affected by global events. The main objective of International Trade is to offer the products available in a country to another that is not available in order to satisfy the domestic demand like food, clothes, oil etc. Any resource, intermediate good, or final good or service that buyers in one country purchase from sellers in another country is an import, and any intermediate good, or final good that producers in one country sell to buyers in another country is an export; a nation that exports more will grow stronger. If a country cannot efficiently produce an item, it can obtain the item by trading with another country that can. As it opens up the opportunity for specialization (a method of production in which companies focus on a limited number of products and services which they can do best) and therefore more efficient use of resources, International Trade has potential to maximize a country’s capacity to produce and acquire goods. International Trade also has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free Trade is the type of market in which goods and services cross borders freely, unrestrained by tariffs or any other sort of barrier to trade, and protectionism exists in many different forms, but the most common are tariffs, subsidies, quotasand regulations that discriminate against foreign businesses. These strategies attempt to correct any inefficiency in the International market.
Global economics, global exchange: Video outline.
Main idea: There are several reasons why specialization and trade are beneficial for a country Key concepts: Comparative advantage: Emphasizes the differences in countries resources and productivity levels Economy of scale: Is the degrade of the scale of production, making the production more efficient or lower cost per unit of output Example
PAKISTAN
Rice and Mangoes
Warm weather
SWEDEN
Paper and steel
Cold weather, forests and
iron
Main idea: In order to have a Comparative Advantage in a country, it must be able to produce at a lower opportunity cost, relative to another country Key concepts: Opportunity cost: Forgone opportunity to produce another good An example of opportunity cost is: If you decided to buy a CD (10$) you wouldn’t be able to go out for dinner or buy a T-Shirt, because you have decided to pay for the CD price, already instead of buying a T-Shirt Complete the chart with the corresponding information
UNITED STATES
10
20
2 cars, one pair of jeans
CHINA
6
6
1 car, one pair of jeans
UNITED STATES has a comparative advantage in AUTOMOBILES CHINA has a comparative advantage in JEANS
Main idea of: Productivity Factors and their determinants
Key concepts:
Hechscher and Ohlin theory looks the determinants of relative labour productivity
Major factors in labour productivity are:
1. The skills of the workers
2. The machinery the workers have to use
3. The organization of the firm
Example:
Type of country
(Example)
Type of workforce
Type of industry
Example of product
Industrialized Countries
Skilled
Capital Intensive
Automobiles, High- Tech Products
Non- Industrialized Countries
Unskilled
Labour Intensive
Textiles, Basic Staples