International Trade

Who Trades with Whom?

• Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

• International Business 5e

• Chapter 5 -

Trade and the Dependent Nation

• Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

• International Business 5e

• Chapter 5 -

• Total
• dependence

• Potential effects of dependence:
• Infuses needed capital
• Creates jobs and raises wages
• Imports technology and skills
• Economic problems transferred
• Political turmoil can spill over

• Total
• independence

Absolute Advantage

• Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

• International Business 5e

• Chapter 5 -

• Ability of a nation to produce a good more efficiently than any other nation (greater output using same or fewer resources)

• Specialization and trade allows each to produce and consume more

• 1 resource unit = 1 ton rice or
• 1/5 ton tea

• Riceland

• 1 resource unit = 1/6 ton rice or
• 1/3 ton tea

• Tealand

Trade Gains: Absolute Advantage

• Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

• International Business 5e

• Chapter 5 -

Comparative Advantage

• Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

• International Business 5e

• Chapter 5 -

• Inability of a nation to produce a good more efficiently than other nations, but an ability to produce that good more efficiently than it does any other good

• Specialization and trade allow each to produce and consume more

• 1 resource unit = 1 ton rice or
• 1/2 ton tea

• Riceland

• 1 resource unit = 1/6 ton rice or
• 1/3 ton tea

• Tealand