Essay on Why Do Countries Trade?

Essay on Why Do Countries Trade?

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Why do countries trade? There are many reason why countries trade with each other, such as on their own, maybe they do not have the resources, or their country do not have means to compensate their needs and wants of the consumers. Developing resources that can be import or export to benefits the economic sources can satisfy the need of the trading countries. Moreover, good and services are import and export for various reason such as its cheaper, better quality, or simply easy to access at a lower cost. International trading is the main source of global economy and development of a more modern industrialized world.
The advantages of trading is to bring a number that will be valuable and benefits to a country comparative advantage, encourages a country to participate in producing specific goods that will be effectively, efficient and benefit international trading (Fletcher,2011). Also, finding methods that would increase trading at a lower price, which would result in a higher purchase power, increase income, and increase the consumer surplus (Hill, 200, p. 168).
Mercantilism is one of the oldest theory of international trade. This theory states that “the holdings of a country’s treasure primarily in the form of gold constituted its wealth”. The main period of the concept of Mercantilism is from 1500 to 1800. However, this theory mainly focus on the exporting and importing activities, the benefits of gold, countries wealth is based on the collection of the gold, as well as the government restrictions on the import and export. The information stated stress the importance of export activities of trade surplus, in order to avoid trade deficit, which result in trade restrictions or acts as trade barrier ().

The theory of Mercantili...

... middle of paper ...

...whom can produce a higher number of goods with the same amount of resources of the other country, whereas Heckscher-Ohlin theory of shows how it could be beneficial for either or both country to engage in international trading. Although, underneath absolute advantage equally benefits trade is not likely, comparative advantage could provide an equally benefit trade between both country. In addition, the opportunity cost is consider a factor when looking at comparative advantage, although, cost is only factor in when absolute advantage is being consider (Hill, 2009).
In conclusion, both theory viewpoints concerning economic power is built on the ability to deliver the efficient product with the higher amount of profit for that particular country. The ability to work together, and be consistent can be beneficial for the entire world, one international trade at a time.

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