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TT Unit 8
TT Unit 8
1. DEFINITION
- International trade is the exchange of goods and services in the world, or
global market.
- In international trade, there are usually two parties:
+ Import – goods and services which are bought from other countries and sold in
the domestic market.
+ Export – goods and services which are produced in the domestic market and
sold in other countries.
- Balance of trade (BOT) is the difference between the value of a
country's exports and the value of a country's imports for a given period.
+ A trade deficit occurs when a value of a nation’s export is less than the value
of its import. (Exports < Imports)
+ A trade surplus occurs when a value of a nation’s export is greater than the
value of its import. (Exports > Imports)
2. ECONOMIC PRINCIPLES
There are two economic principles that help explain how and when
specialization is advantageous.
- Absolute advantage evaluates how efficiently a single product can be
produced for quality, quantity and profit.
- Comparative advantage helps an entity select between several products to
determine which has the greater return.
3. BENEFITS
More Choices for Consumers
Access to new customers
Product sale flexibility
Political effects
Price Stability
Enhances Technological Know-How
4. COMMON BARRIES TO INTERNATION TRADE
Natural obstacles like language, distance, etc.
Tariff barriers — import duty, export duty, or anti-dumping duty.
Non-tariff barriers — embargoes, government restrictions on imports, and
import quotas.