The comparative advantage stems from the ability to produce goods and services at low opportunity costs, which is influenced by how available economic resources (also called factors of production) are and how good their quality is. For
How Do Imports Impact the Economy?
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
What Are the Factors Affecting Imports?
Availability is a factor 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 support them. Another
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 the country. Instead, they are only available in other countries. So, we have to import to get
What are the Benefits of International Trade?
Increased access to cheaper and more varied goods and services is key benefits 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 Sanction: Meaning, Reasons, Types, Pros, Cons
What's it: Trade sanction is formal penalties for stopping or reducing the purchase or sale of goods to a country. The sanctioner may be a country with a strong economy such as the United States or several countries together or through an
Comparative Advantage: Meaning, 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
Terms of Trade: Meaning, How to Calculate, Impacts
What's it: Terms of trade (TOT) is the ratio between export prices and import prices. Because international trade involves various goods and services, economists compute them using a price index to represent the average price of exported and imported
Trade Balance: Formula, Calculation, Impacts, and Affecting Factors
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