In: Economics
In the aggregate trade model, we showed that gains can be made from international trade. Exactly how does this work-that is, what are the gains exactly?
Draw a graph that shows gains from trade (PPF and SIC graph). Draw your graph so that, when trade opens, production increase for the good on the vertical axis.
Gains from trade :
It is the net benefits obtained by economic agents when they engage in free international trade . They are the increase of consumer and producer surplus when liberalized trade is practised . International trade increases national income . This is one of the gains from purchasing low priced imports . Another gain can be measured by looking at the TOT (terms of trade) . The gains can be achieved due to exchange and specialization .