Why do countries trade with each

Clear evidence of trading over long distances dates back at least 9, years, though long distance trade probably goes back much further to the domestication of pack animals and the invention of ships. Certain industries do not get a chance to grow because they face competition from more established foreign firms, such as new infant industries which may find it difficult to establish themselves.

If the elasticity in home country is high they might lower the price below production costs to sell a lot. Well, countries trade for the same reason - one country has something that another country wants.

In a command economic system the government makes most of the economic decisions. But taxpayers are footing the bill for this. Show, using examples, why this may be to do with principle of comparative advantage.

USA and any European country. There are also transport costs involved in international trade, which decrease the efficiency and increase production costs. The impact of a tariff is shown in Figure 1 below. Figure 1 Impact of a tariff The tariff has the effect of shifting the world supply curve vertically upwards by the amount of the tariff.

We have already seen that a country may choose not to produce a product even when they have the absolute advantage in producing it. Individuals decide what jobs they will do and what they will produce. This makes trade in this item more profitable since the cost per item is reduced.

Other protectionist measures Countries can also use a range of other protectionist measures to restrict imports. By investing work force and capital in cultivation of carrots Poland misses an opportunity to produce more cars which can bring higher revenue to the polish economy.

This example explains why it is sometime worthwhile for countries to export goods that they are capable of producing. We have already seen that a country may choose not to produce a product even when they have the absolute advantage in producing it.

The level of imports will fall from QaQd to QbQc. Natural Resources and Factor of Endowment The most obvious and visible cause for international trade is a difference in location of natural resources and factor of endowment. Specialisation Specialisation is the second fundamental principle associated with trade, and results from the division of labour.

Extending the previous point, the monopolies abroad might find the elasticities of different countries different and can price discriminate. There are several different reasons why one country may have something that another country wants.

These kinds of decisions are made in different ways depending on the economic system that is in place. Going back to the lunch swapping, you could, at least theoretically, learn how to make brownies yourself. But in general every country produce a certain range of products in high volume.

Countries can be in the same position. In a traditional economic system, tradition decides what work people do and how it is done.

The Economist, Economies of scale and scope.

Why do countries trade?

If the elasticity in home country is high they might lower the price below production costs to sell a lot. Similarly a country may choose to import a product even when they have a comparative advantage in producing that product at home.

Holland is a medium populated country with only 61st place in the world in terms of population CIA, Like China which huge industry sector produce number of goods big enough to sell all over the world.

The government decides what goods and services will be produced and sells the goods and services. This increases the inequalities between 2 countries and is nowadays serious problem when considering the trade between developed and developing countries.May 09,  · well,u asked y countries do trade with eachother,,so the answer is very simple that production of some specific products can be greater in any country due to by some natural effects like if in some countries production of cotton is much,even after utilizing,then those countries sell the rest of the cotton to the other country which has needed it,so it raises the financial postion of a Status: Resolved.

In my essay I’ll try to justify why countries trade with each other by pointing out and explaining particular aspects of foreign trade. Natural Resources and Factor of Endowment The most obvious and visible cause for international trade is a difference in location. „Why do countries trade with each other Show, using examples, why this may be to do with the principle of comparative advantage.” In the modern world, there is.

Countries trade in order to maximize their products and production.

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By specializing in only some of their products a country can use the limited resources in the world more efficiently!. The international trade helps to make the distribution of resources more even. The countries can specialise to work that they are best at.

It also helps countries to obtain the products they otherwise might not get. Also, it increases the variety of goods. E.g.

Mar 04,  · Why do Nations trade? Countries trade with each other when, on their own, they do not have the resources, or capacity to satisfy their own needs and wants.

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Why do countries trade with each
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