Essay about Advantages and Disadvantages of Free...

1a) Advantages of free international trade 1. Increasing the production. Countries are enabled by free international trade to specialise or to focus in the production of the goods in which they have a comparative advantage. Specialisation countries can take the benefit of efficiencies generated from increased output and economies of trade. The size of the firm’s market are increased by the international trade which results in lower average costs and increasing in productivity, as it ultimately leads to increase in production. 2. Production efficiencies. The efficiency of resources allocation is improved by the free international trade, as the higher productivity and increasing in total domestic output of commodities and services are†¦show more content†¦With free international trade a lot of jobs will be created in the country, especially in industries of manufacturing and services which can absorb the unemployment that created by restructuring as firms down their workforce. Disadvantages of free international trade. 1. Structural unemployment may occur in the short term with the removal of trade barriers. This will have impact on large numbers of workers, as well as their families and local economies. In growth industries workers often will have difficulties to find employment. 2. Business, consumers and employees are more weak to downturns in the economies of trading partners. For example, recession in the USA leads to decrease in demand for UK’s exports, leading to falling in export incomes, lower GDP and incomes, decrease in domestic demand and rising in unemployment. 3. Some of the countries with surplus commodities may dumb them on international markets at a low price. Under such conditions, some of the efficient industries can might find difficulties in competing for long period. Furthermore, countries whose economies are mostly rural will face unfavourable terms of trade. For example, ration of export prices to import prices. Which means that their export income is more smaller than their import payments the make for high value added imports, as it leads to subsequently large foreign debt levels. 1b) Nash equilibrium is a solution theory of a non-cooperative game which involves two or moreShow MoreRelatedInternational Trade And The Global Marketplace1428 Words   |  6 Pagescountries are engaged to international trade in order to achieve economic growth, free trade agreement and financial liberalization has contributed to the opening up of world economies and resulted in more international trade. Countries use their comparative advantages to gain a positon in the global marketplace and achieve economic growth (Seyoum 2007). International trade is a critical resource of revenue earning for developing countries. However, the benefits realized from free trade are mostly enjoyedRead MoreComparative Advantage1689 Words   |  7 PagesAssignment 1: Comparative Advantage Eco 305 – International Economics David Ricardo introduced the law of comparative advantage. This theory proposed that even if one nation is less efficient than the other nation in the production of both commodities; there is still a basis for mutually beneficial trade. This is as long as the absolute disadvantage that the first nation has with respect to the second is not in the same proportion in both commoditiesRead MoreAdvantages Of International Trade For Developing Nations1313 Words   |  6 PagesAdvantages of international trade for developing nations Although the concept of free trade and globalisation may subtly imply a polarity between the developed and developing worlds, it can be argued that, in order to function successfully, the pressure to create a competitive and comparative advantage hold all nations on a level-playing field. Sinclair Davidson (2015) cited David Ricardo (1821) in his argument that foreign trade is, indeed, beneficial to a country, for a number of reasons. By reducingRead MoreInternational Trade Simulation Essay1294 Words   |  6 Pageshappens, international trade is sometimes an only option. As with anything in life, there are advantages and disadvantages to international trade. 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As countries continue to grow and resources become smaller, trade with otherRead MoreThe Pros and Cons of Globalization Essay1680 Words   |  7 Pagesof Economies and Societies Around the World, 2005). The third and final definition is from Thomas Friedman who wrote The Lexus and the Olive Tree. ?Globalization is not a phenomenon. It is not just some passing trend. Today it is an overarching international system shaping the domestic politics and foreign relations of virtually every country, and we need to understand it as such? (Friedman, 2004). Now that we know what globalization is, we can know try to track it and better understand it and itsRead MoreAdvantages And Disadvantages Of International Trade1334 Words   |  6 Pagesfrom Japan. International trade has advantages and disadvantages for everyone involved. It wasn’t that long ago that the items we owned onl y came from within our own country. So why is it that international trade exists and what advantages does this bring to a developed country and what advantages does this bring to a developing country? International trade also has its downfalls. In the following assessment I will look at both the advantages and disadvantages of international trade and how we