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1. INTERNATIONAL TRADE

2. International trade - trading between countries.
- most obvious reason is that different countries
have different factor endowments and that
international mobility of these factors is
severelly limited.

3. REASON FOR INTERNATIONAL TRADE
1. The diversity in conditions
- trade may take place because of the diversity
in conditions of production among countries.
2. Return to scale
- because of increasing returns to scale.
3. Tastes of goods
- countries might engage in trade if their tastes
for goods were different.

4. ADVANTAGES
• increase world output
• variety of goods & services
• higher income & economic growth
• improved relationship
• sharing technology and information
• efficiency and cost effectiveness

5. DISADVANTAGES
• economic interdepence
• political interdepence
• deplate a nation reserve

6. PROTECTIONISM
• to protect infant industries
• to protect against unfair trades
• to protect domestic employment
• industrial diversification
• source of government revenue
• to protect strategic goods

7. TRADE OF BARRIERS
• TARIFF
• EXPORT SUBSIDIES
• GRANT
• QUOTA
• EMBARGO
• EXCANGE CONTROL
• IMPORT LICENCES

8. • THE ABSOLUTE ADVANTAGE
- the production of a commodity when it is more
efficient than the other country at producing
commodity
- when it can produce more of a commodity
than the other country using the same amount
of resources.

9. • THE COMPARATIVE ADVANTAGE
- a country should specialize in the production
of goods or services in which the country has
a greater comparative advantage or lower
opportunity cost and imports the commodity
where the opportunity cost is higher or
comparative advantage is less.