Question

State the various reasons for international trade

Answer 1

Ans.

International Trade refers to the trade of the goods and services among different countries.

Some Reasons for International Trade are following :

1) Expansion of Local Markets :

International Trade helps reaching range of customers in areas where , there is more demand of a particular product , and because Developed countries have high Per capita income , due to this customers in these countries can pay way more than other countries. In this way , International Trade helps Expansion of Local Markets.

2) Exchange In Technology :

Technology plays a very important role in the Overall cost of the product. Countries differ in their technological abilities to produce goods and services. So, the countries where the advanced technology is available , the production would be cheaper as compared to other countries.

3) Economies of Scale :

Different Countries can have the benefit of Economies of Scale in the particular goods in which they produce the goods on a large scale efficiently (at less cost as compared to other countries) and for rest of the goods and services , it is beneficial to import these from other countries at low cost . Hence, International Trade helps in reducing Cost of Production through Economies of Scale.

4) Foreign Exchange Rate Advantage :

Taking benefits of the Currency fluctuations , i.e., When domestic currency Depreciates , it is beneficial to increase the exports and reduce the imports as in this situation , more units of domestic currency can be bought in exchange of foreign currency , So Exporters would be in benefit.