Question

Modern communications technology is making it possible to perform many services—e.g., reading X-rays or even doing legal research—from remote locations. How does this affect the potential gains from trade?

Answer 1

Improved communication technology makes it easy for business organizations to carry out trade. Firms can use the technology to market their products by communicating to consumers in all parts of the world. Increased awareness about the existence of the products of a firm increases its sales. Communication technologies such as social media and emails have made it easier to reach a large audience in marketing products and services. The potential gains from trade, therefore, increase with advancement in communication technology.

Marketing research has also been enabled through modern communication technology. Researchers can obtain information easily about consumers in all parts of the world. The firm can, therefore, understand the needs and tastes of its customers. This makes it easy to produce a marketing mix that suits the needs and tastes of the customers. This in turn increases the sales of a firm.