Topic 3 Theories of International Trade.ppt

Topic 3 Theories of International Trade.ppt - Topic 3...

This preview shows page 1 - 5 out of 17 pages.

Topic 3: THEORIES OF INTERNATIONAL TRADE Lecture Notes Prepared by: Dr. Martine Oleche University of Nairobi School of Economics 09/11/18 1 Dr. Martine Oleche, School of Economics, University of Nairobi
Image of page 1

Subscribe to view the full document.

3.1 The Need for international trade The reasons for trade between countries are not in anyway different from reasons individuals trade within a country. In essence, international trade is not more than trade between individuals who live in different countries. The importance of international trade is as follows: 3.1.1 Imports Serve Domestic Industry Domestic industries would have pretty difficult time if basic raw materials, machinery and other needs are not met. Some domestic industrial needs are only met by import. 3.1.2 Import Serves Domestic Consumers International trade enlarges the range of consumer’s choices of goods and services. Without international trade consumers will have fewer choices. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 2
Image of page 2
The Need for international trade Contd… 3.1.3 Exports are Vital to Many Domestic Producers The market for nations export is very important. For example without international trade, the market for the Nigerian crude oil, columbite, cocoa, rubber etc would have been limited to domestic economy. 3.1.4 Exports Serves as A Foreign Exchange Earners Exports of goods and services act as foreign exchange earners to the domestic economy. Foreign exchange availability is essential requirement for the survival of any national income. 3.1.5 Exports Act as Agent Of Growth Other countries demand for goods and services produced within a domestic economy acts as a catalyst to the growth of the total spending and hence growth in the gross national product of such an economy. 09/11/18 Dr. Martine Oleche, School of Economics, University of Nairobi 3
Image of page 3

Subscribe to view the full document.

3.2 Theories of international trade These are also known as the basic of international trade. 3.2.1 The Theory of Absolute Advantage The classical economists, Adam Smith said that the basis of international trade falls along the division of absolute advantage, which may be defined as the good, or services in which a country is more efficient or can produce more than the other country or can produce the same amount with other country using fewer resources.
Image of page 4
Image of page 5

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern