Scribd
Upload
7 views

o

The document discusses the advantages and disadvantages of international trade, highlighting its role in fostering innovation, economic growth, and specialization while also addressing challenges such as shipping costs and cultural differences. It outlines the types of trade, including foreign and local trade, and explains the concepts of importation and exportation. Additionally, it covers economic resources and factors of production, emphasizing the importance of demand and supply determinants in trade.

Uploaded by

Justine Vinarao Cu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
7 views

o

The document discusses the advantages and disadvantages of international trade, highlighting its role in fostering innovation, economic growth, and specialization while also addressing challenges such as shipping costs and cultural differences. It outlines the types of trade, including foreign and local trade, and explains the concepts of importation and exportation. Additionally, it covers economic resources and factors of production, emphasizing the importance of demand and supply determinants in trade.

Uploaded by

Justine Vinarao Cu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

6.

Innovation-Global trade fosters innovation as businesses and countries are exposed to


new ideas, technologies, and practices. The drive to meet global standards often results
in the development of better products and services.

7. Growth - International trade serves as a catalyst for economic growth by providing


businesses access to larger markets, increasing export revenues, and encouraging
foreign investments.

8. Uneven Distribution of Natural Resources - Natural resources such as oil, minerals, and
arable land are not distributed evenly across the globe, making trade essential for
countries to acquire what they lack.

9. Division of Labor and Specialization By focusing on the production of goods and


services that a country or region excels at, international trade encourages division of
labor and specialization, leading to greater efficiency and lower production costs.

10. Differences in Economic Growth Rate - Countries with varying rates of economic
growth benefit from trade by meeting each other's needs. Fast-growing economies
demand more goods, while slower-growing ones may have excess production capacity.

ADVANTAGES OF INTERNATIONAL TRADE:


1. Increased revenues - Selling products to international markets expands the customer
base, leading to higher sales and increased revenue.

2. Decreased competition Expanding into international markets allows businesses to


escape intense local competition and tap into less saturated markets.

3. Longer product lifespan - International trade provides opportunities to sell products in


markets where demand still exists, even when local demand has declined.

4. Easier cash-flow management - Exporting to different countries with varying seasons


or economic cycles helps maintain consistent sales throughout the year.

5. Better risk management - A business exporting to multiple countries is less affected if


one market faces a recession or economic downturn.

6. Benefiting from currency exchange-Companies can benefit from favorable currency


exchange rates when exporting goods and services.

7. Access to export financing-Many governments and financial institutions provide


support to exporters, such as loans, grants, or tax incentives. E.g. Export-import banks
offering loans for small businesses expanding to international markets.

8. Disposal of surplus goods International markets provide a way to sell excess inventory
that may not sell domestically.
9. Enhanced reputation-Being a global player improves a company's reputation and
credibility, making it more attractive to customers and investors. E.g. A brand known
internationally gains prestige and trust, which can also boost domestic sales.

10. Opportunity to specialize - International trade allows businesses and countries to


focus on producing goods and services they excel at, leading to greater efficiency. E.g.
Switzerland focusing on luxury watch production and exporting globally.

✔ DISADVANTAGES OF INTERNATIONAL TRADE:


1.Shipping Customs and Duties-Transporting goods across borders involves high shipping
costs, delays, and complex customs regulations. Additionally, import/export duties can
significantly increase the cost of goods.

2.Language Barriers-Communication can be difficult when dealing with foreign partners,


customers, or suppliers who speak a different language. Misunderstandings can lead to
errors in contracts or product specifications.

3. Cultural Differences Differences in customs, traditions, and business practices can lead
to misunderstandings or strained relationships. Marketing strategies that work locally
may fail internationally due to cultural misalignment.

4.Servicing Customers Providing after-sales service, support, and warranties can be


challenging when customers are located in different time zones or regions.

5. Returning Products-Handling returns is more complicated in international trade due to


higher shipping costs, longer timelines, and stricter regulations.

6. Intellectual Property Theft Expanding into global markets increases the risk of
intellectual property (IP) theft, such as counterfeiting or unauthorized use of trademarks
and patents.

KINDS OF TRADE:
1.Foreign Trade/International Trade

exchange of goods and services between one country to another.

2.Local Trade/Domestic Trade

exchange of goods and services inside the Philippines (only one country).

IMPORTATION AND EXPORTATION:


• Export products that are transported as trade to other countries (sold by the country)
• Import products that are transported as trade into the country (bought by the country)

Greatest advantage - these are the easiest products to produce.

Greatest disadvantage these are the products that are hardest to produce

Theory of Comparative Advantage: A country should export the products on which it has
the greatest
advantage and import the products on which it has the greatest disadvantage.

Demand various commodities that buyers, consumers, and households are willing to buy
at different prices at

a defined time and place

Supply at the point of view of the producers/sellers.

Competition is always present at the part of the sellers, especially when international
trade and business are present.

DEMAND CURVE DETERMINANTS:


1. Event or Price expectation

2. Change in number of buyers

3. Change in prices of related goods Substitution.

Complementary products.

4. Change in consumers income

5. Consumer expectation

SUPPLY DETERMINANTS:
1.Change in number of sellers

2.Change in cost of productions

3.Change in technology
4.Change in price expectation

5.Change in calamities - Positive and Negative effect.

6.Taxes and subsidies. If the tax increases, the cost of products will increase and the
products will become more difficult to sell.

ECONOMIC RESOURCES AND ALSO KNOWN AS FACTORS OF PRODUCTION:


Economic resources inputs or resources used in the production of goods and called the
factors of production. Categories include land, labor, capital, and entrepreneurship.

1. Land → The physical space or area on which production takes place. It also includes
the economic natural resources. Farmland, oil deposits, trees, water resources, gold.

2. Labor

3. Capital → The tools and other productive equipment utilized in producing consumer
goods and service. Plant, money, industrial robots, machine, computer

4. Entrepreneurship → A human resource responsible for combining or organizing the


land, labor, and capital resources into a good or service. Goal of these people is to gain
and maximize profit

Profit = total revenue - total cost

Revenue > total cost = profit

Cost per unit = total cost / total units sold

Revenue < total cost = loss

Revenue per unit = Total revenue / total units sold

Revenue = total cost = breakeven

You might also like