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Home Theory of International Trade

Theory of International/Foreign Trade:


Home Trade and International 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 and National Income:


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. Continue reading.


Origin and Purpose of International Trade:


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.


Theory of Comparative Cost:


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. Continue reading.


Gains From International Trade:


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.


Modern Theory of International Trade:


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.


Terms of Trade:


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.


Advantages and Disadvantages of International Trade:


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. Continue reading.




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