The Rise Of Free Trade

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Knorr (1987) in his book”The Rise of Free Trade “mentioned the following advantages of the International trade: The International trade: .Improves the domestic competitiveness •Takes advantage of international trade innovation •Increase sales and benefits •Extend deals capability of the current items •Maintain cost competitiveness in your local business sector •Enhance potential for extension of your business •Gains a worldwide market share •Reduce reliance on existing markets •Stabilize seasonal market fluctuations (Knorr, 1987). Absolute advantage Absolute advantage is defined as the capacity of a nation, individual, company or region to produce a good or at a lower expense or costs every unit than the cost at which any other…show more content…
Significant of comparative advantage • • It is more about the idea of a country or an individual trading a product one is more efficient at producing for a product he or she is less efficient at producing. This saves time, materials and labour, while also reducing the opportunity cost for producing the good. The reduction in opportunity cost shows a difference between absolute advantage and comparative advantage (Internationalecon, 2015). Let 's look at two more examples: Let 's say there are only two countries: country A and country B, and they produce only two goods: corn cereal and designer jeans. Here 's an illustration of how much each country can produce of these two goods using only one hour of labour to produce them: As you can see, country B can produce more of both goods than country A. They can pro-duce either 15 boxes of corn cereal or four pairs of jeans per hour. Country A, on the other hand, can only produce ten boxes of corn cereal or they can produce three pairs of designer jeans instead Terms of trade Spitäller (1980) has defined terms of trade as the value of a country 's exports relative to that of its imports. It is calculated by dividing the value of exports by the value of imports, then multiplying the result by 100 If export prices are rising faster than import prices, the terms of trade index will rise. This
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