Comparative advantages come from the ability to produce goods and services at low opportunity costs, which is influenced by the availability of economic resources (also called factors of production) and their quality. For example, several countries
International Trade
Imports Impact: Competition, Growth, Inflation & More
Imports impact the economy in several aspects. For example, at the micro level, imports affect competition by increasing supply in the domestic market. Consequently, there is more pressure on prices and profitability in the domestic market.On the
Why Countries Import: A Look at Factors Affecting Imports
Availability is one of the fundamental factors affecting imports. We import goods from abroad because they are unavailable in the domestic market. For example, the domestic economy does not produce them because the geographical location does not
Reasons Why International Trade Exists
International trade exists for several reasons. First, differences in demand underlie trade. Certain products we want are not produced in our country but are only available in other countries, so we have to import them.Another key reason why
Benefits of International Trade
Increased access to cheaper and more varied goods and services is a key benefit of international trade. Thus, it allows us to increase well-being. We can satisfy our needs and wants by buying more varied and cheaper products not produced
Trade Sanctions: A Tool for Change (Reasons, Effectiveness, Types, Impact, Pros, Cons)
What's it? Trade sanctions are formal penalties for a country to stop or reduce the purchase or sale of goods. The sanctioner may be a country with a strong economy, such as the United States, or several countries together or through an international
Comparative Advantage Explained: Assumptions, Examples, Criticisms
What's it: Comparative advantage is a favorable position arising from producing goods and services at a lower opportunity cost. This concept is important in explaining international trade and specialization in production. That answers why countries
Terms of Trade: Understanding a Country’s Trading Power and & Its Impact
Terms of trade (TOT) are a crucial concept in international trade, reflecting a country's relative trading position. They essentially measure how much a country can import with its exports. By understanding it and the factors that influence it, you
Trade Balance: Understanding the Flow of Goods and Currency + Formula, Impacts, Determinants
What's it: Trade balance is the difference between the country's export value and its import over a certain period. When exports' value exceeds imports, the country runs a positive trade balance (trade surplus). Meanwhile, if the value of
Trade Surplus: Impact on Growth & Currency + Pros, Cons
What's it: A trade surplus is when the value of a country's exports exceeds its imports. In other words, the country reports a positive trade balance. Since international trade involves two different currencies for payment, a surplus also affects the
Trade Restriction: Impact on Consumers & Businesses (Reasons, Types)
What's is: Trade restriction refers to the various barriers that make the flow of goods and services between countries immobile. If the barriers come from government policies, we call it trade protection.Trade restrictions affect the demand
International Trade: Your Guide to the Global Economy
International trade fuels the global economy, driving the exchange of goods and services across borders. It plays a critical role in our daily lives, from the smartphone in your pocket to the clothes on your back. But how exactly does international
Trade Barriers Explained: Types, Why They Exist – Impacts on Economy, Consumers, Business
A trade barrier is any obstacle that limits the movement of trade flows between countries. Generally, this measure protects the domestic economy.There are various kinds of trade barriers, including tariffs, quotas, embargoes, sanctions, and
Trade Deficit: Exploring Causes & Impacts + Pros, Cons
What's is: A trade deficit occurs when the value of a country's exports is less than its imports. To finance the deficit, the country has to borrow from foreigners or sell assets (through investment inflows in the capital market, for example).
Absolute Advantage: Understand Why Countries Trade + Assumptions, Criticism
What's it: Absolute advantage refers to the ability to produce goods or services more efficiently than others. As a result, those with this advantage can produce at a lower absolute cost.Absolute advantage is important for explaining why
Imports: Determinants, Benefits, Drawbacks, Impact on Global Trade
What's it: Import means purchasing goods and services from international trade partners. For example, Japanese car manufacturers ship and sell their products to the United States market. So, from an American perspective, they are importing cars.