Theory of
International/Foreign Trade:
"Trade by
a company within the country in which it is based, is known as home trade
or domestic trade". In the home trade, people try to specialize
in the production of those commodities in which they have a comparative
advantage. Continue reading.
Foreign trade plays an important role in the economies of backward as well as
advanced countries of the world. This can be seen from the fact that in some of
the countries like Canada, United Kingdom, Australia, etc., more than 20% of the
national income is derived from international trade.
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Trade between different countries takes place because it is to their mutual
advantage. The main conditions under which international trade is profitable are
as follows: Continue
reading.
The Theory of Comparative Cost was put forward by David Ricardo in 1817. The
main purpose behind developing this theory was to advocate for mutual trade.
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The gains from international trade arise because of the diversity in the
conditions of production (natural or acquired) in different countries. Each
country tries to specialize in the production of those commodities in which its
comparative cost advantage is greatest or the comparative disadvantage is the
least. Continue reading.
The modern theory of international trade also named as the
General Equilibrium
Theory of International Trade was developed by two Sweedish economists, Hecksher
and Ohlin. Continue reading.
By terms of trade, is meant terms or rates at which the products of one
country are exchanged for the products of the other. It is known to us
that every country has got its own money. Continue
reading.
We cannot deny this fact that international trade has certain evil
consequences but if it is properly controlled, it can prove very beneficial for
all the countries of the world.
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reading.
