International Trade

International Trade

1. The economic interaction among different nations involving transfers of goods and services.

2. Advantages of International Trade

   • Wider choice of goods
   • Increase competition
   • Market for Excess Output
   • International Relations
   • Higher Standard of Living

3. Law of Comparative Advantage

   • A country should specialise in the production of those goods at which it is relatively most efficient, and obtain its other requirements through international trade
   • Limitations
     • Assumes Free Trade Exists
     • Assumes Constant Returns
     • Assumes Occupational Mobility of Workers
     • Ignores Reasons for Avoiding Specialisation
     • Ignores Transport Costs

4. Government Intervention in International Trade

   • Tariffs
   • Quotas
   • Exchange Control
   • Embargo
   • Red Tape
   • Subsidies