Week 8 Assignment_International Trade in Rodamia

Week 8 Assignment_International Trade in Rodamia - Week 8...

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Week 8 Assignment International Trade in Rodamia Rodamia is a large country compared to its neighbors in terms of population, area, and the level of economic growth. For Rodamia it is becoming important to consider trading with other countries. In this report facts will prove that trading with these countries could prove beneficial to the country of Rodamia. In this process absolute advantage and comparative advantage will be covered. Absolute advantage is the ability to produce a good at lower cost, in terms of real resources, than others countries. Comparative advantage is the ability to produce a good at a lower cost, relative to other goods, compared to other countries. Rodamia shares its borders with three countries- Uthania, Alfazia, and Suntize. Opening borders to international trade with these countries would lead to great benefits. Importing products would mean consumers would have a bigger choice in terms of price and quality. Domestic producers would have the advantage to expand their markets to these other countries as well. Importing and exporting goods could make Rodamia a more vibrant and wealthy country. Rodamia relies on three main domestic productions in its economy; agriculture (mostly corn and cheese), industry, and services. Its surrounding countries offer similar products in some cases and different products in others. Alfazia produces cereals and agricultural products and produces these more efficiently than industrial products. Suntize produces electronic goods more efficiently than agricultural products. Last, Uthania produces both agricultural and electronic goods similarly. Rodamia should specialize and export in cheese and DVD’s in the first year, because it has comparative advantage in these areas. Rodamia should import corn from Uthania, watches from Suntize, and should not import any products from Alfazia. This composition of
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