International Economics Part 1 - Reasons to trade?
This series will focus on international economics. Today we will discuss the positive implications of international trade. Lets go baby!!!
1. Greater Choice - Eating fruits and vegetables off-season is a prime example of this. People not only have an access to the domestically produced goods and services, but also products from a number of different countries.
2. Lower prices - International trade gives consumers the opportunity to purchase goods and sevices at a cheaper price as they are able to buy their demanded goods and services from other countries. Producers also gain from international trade, since they can purchase raw materials and other goods from other countries at a cheaper rate. The reason why this is possible is because some countries have more access to natural resources, have better technologies or different quality of labour forces. This means that more raw materials and goods are available, which can be sold at a lower price.
3. Economies of scale - when firms operate on an international market as well as on the domestic one, they are gaining size and therefore will increase the demand. As firms get bigger they can exploit economies of sclae, which will reduce their average costs.
4. Differences in resources - Some countries have different resources than others. When a resource is not available, but a firm needs it to produce a certain product, they can import the resource from different countries. Without international trade this would not be possible and countries with limited amount of resources would not be able to develop.
5. More competition - Because of international trade, domestic producers compete with foreign firms. This results in more efficiency and a reduction in prices. Therefore, consumers will have more options and more qualitative products to choose from.
6. Better allocation of resources - If firms can compete freely without government intervention then countries that are best at producing certain goods and services will produce them. These goods and services will be produced at the lowest cost and the efficiency will be maximized. Theoretically, if this happens in every country in the world, resources will be allocated most efficiently.
2. Lower prices - International trade gives consumers the opportunity to purchase goods and sevices at a cheaper price as they are able to buy their demanded goods and services from other countries. Producers also gain from international trade, since they can purchase raw materials and other goods from other countries at a cheaper rate. The reason why this is possible is because some countries have more access to natural resources, have better technologies or different quality of labour forces. This means that more raw materials and goods are available, which can be sold at a lower price.
3. Economies of scale - when firms operate on an international market as well as on the domestic one, they are gaining size and therefore will increase the demand. As firms get bigger they can exploit economies of sclae, which will reduce their average costs.
4. Differences in resources - Some countries have different resources than others. When a resource is not available, but a firm needs it to produce a certain product, they can import the resource from different countries. Without international trade this would not be possible and countries with limited amount of resources would not be able to develop.
5. More competition - Because of international trade, domestic producers compete with foreign firms. This results in more efficiency and a reduction in prices. Therefore, consumers will have more options and more qualitative products to choose from.
6. Better allocation of resources - If firms can compete freely without government intervention then countries that are best at producing certain goods and services will produce them. These goods and services will be produced at the lowest cost and the efficiency will be maximized. Theoretically, if this happens in every country in the world, resources will be allocated most efficiently.
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