10981763
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Mind Map by Omar Blanco, updated more than 1 year ago
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Created by Omar Blanco
over 6 years ago
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International Trade Theories
- Theory of Absolute Advantage
- Adam Smith a classic economist
said that the basis of international
trade falls along the division of
absolute advantage, the goods or
services in wich a country is more
efficent or can produce more than
any other country or can produce
the same amount with other
country using fewer resources.
- Adam Smith a classic economist
said that the basis of international
trade falls along the division of
absolute advantage, the goods or
services in wich a country is more
efficent or can produce more than
any other country or can produce
the same amount with other
country using fewer resources.
- Theory of Comparative Advantage
- if two nations (regions or
individuals) have different
opportunity costs in producing a
good or service, the nation with the
lowest opportunity cost has a
comparative advantage in that
particular good or service.
- if two nations (regions or
individuals) have different
opportunity costs in producing a
good or service, the nation with the
lowest opportunity cost has a
comparative advantage in that
particular good or service.
- The gain from trades
- Arising from the law of comparative advantage
as stated earlier, countries would benefit from
trade with a rise in world output without
additional factor inputs when countries
specialize in the production of those goods in
which their opportunity cost is lower.
- Arising from the law of comparative advantage
as stated earlier, countries would benefit from
trade with a rise in world output without
additional factor inputs when countries
specialize in the production of those goods in
which their opportunity cost is lower.
- Competitive advantage of Nations
- Michael Porter developed this theory
which attempt to expain why
particular nations achieve
International success in particular
industries. Porter states that "National
prosperity is created, not inherited".
- Michael Porter developed this theory
which attempt to expain why
particular nations achieve
International success in particular
industries. Porter states that "National
prosperity is created, not inherited".
- The Theory of factor proportions
- Also know as heckscher-Onlin
Theory. The theory was based on a
more modern concept of
production, one that raised capital
to the same level of importance as
labor. The markets for the inputs
and the outputs are perfectly
competitive and also the increase
in the production of a product can
experience a dimishing returns.
- Also know as heckscher-Onlin
Theory. The theory was based on a
more modern concept of
production, one that raised capital
to the same level of importance as
labor. The markets for the inputs
and the outputs are perfectly
competitive and also the increase
in the production of a product can
experience a dimishing returns.
- The rent for suplus Theory
- According to Adam Smith, a
country carries out thar surplus
part of the produce of their land
and labor for which may satisfy a
part of their wants, and increase
their enjoyment. I.T. does not
necessarily reallocated factors of
production but enables the output
of the suplus resources to be used
to meet foreign demand.
- According to Adam Smith, a
country carries out thar surplus
part of the produce of their land
and labor for which may satisfy a
part of their wants, and increase
their enjoyment. I.T. does not
necessarily reallocated factors of
production but enables the output
of the suplus resources to be used
to meet foreign demand.
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