INTERNATIONAL TRADE ASHA SUKUMARAN

2 Table of Contents Trade Absolute Advantage Comparative Advantage Law of Comparative Advantage Limits to Trade Terms of Trade Gains from Trade Methods of Restricting Trade Conclusion Reference

3 Trade Buying and selling of things International Trade Trading across countries

4 Absolute Advantage – When one country can produce a good with less resource than the other country Comparative Advantage – When one country can produce a good at a lower opportunity cost compared to the other country. (i.e if it has to forego less of other goods to produce it)

5 Law of Comparative Advantage – Trade can benefit all countries if they specialize in the goods in which they have a comparative advantage

6 Limits To Trade Transport costs Factors of production Government restrictions

7 Terms of Trade Average Price of Exports Average Price of Imports Expressed as percentage Changes in terms of trade is caused by changes in demand and supply of imports & exports.

8 Gains from Trade Decreasing costs Increased competition Trade as an engine of growth Non economic advantages

9 Methods of Restricting Trade Custom duties Quotas Import licensing Embargoes Export taxes Subsidies

10 Conclusion The advantages of having international trade is: Opportunities for specialization Efficient use of resources Maximize country’s capacity What is certain is that the global economy is in a state of continual change and, as it develops, so too must all of its participants.

11 Reference am/campaigns/downloads/what_is_trade.pdf asphttp:// asp Krugman Wells – Microeconomics John Sloman - Economics

12 THANK YOU