Question

Carefully explain why there are gains from intraindustry trade.

Answer 1

ANSWER:

Intra industry trade means that the products that are traded belong to the same industry and the products are similar in nature and this has led to a lot of growth in last 20 odd years.

Reasons for intra industry trade benefits:

1. Intra industry trade has led to a lot of innovation in the industry due to similar kind of products being traded which has led to urge producers to make quality products at a cheaper costs.

2. Since there is a lot of trade between the countries and this allows the producers to produce products within a certain range due to comparitive advantage being known as before they would products in all sort of ranges and that would in less profits compared to now under which , more profits are made due to comparitive advantage.

3. There are many diffferent kind of products that are available within the same industry and this has led to choices for the consumers and the producer has also been opened to a larger market and this creates a win win situation for both the producer as well as the consumers thereby creating a larger pool for consumers to choose from and the producers have a lot of people to whom they can sell the products thereby creating more profits.