Question

In: Economics

why developed countries has a higher iit(intra industry trade)?

why developed countries has a higher iit(intra industry trade)?

Solutions

Expert Solution

Answer : As Develop countries resources are properly used and have economics of scale  as compare to  developing or underdeveloped countries. These countries are capital abundant and in order to maximize there profit they hired cheap labor of developing or under developed countries.

Advantages for Developed countries in higher intra industry trade are :

  • Benefit or proper usage of economics of scale that developed countries have and lower cost product available to the consumer.
  • Increases the variety of product of the same industry which is benefit both business as well as consumers.
  • Developed countries followed intra industry because to enjoy higher income .
  • Differentiation of product leads to higher profit in the market area.
  • Same product should be exported and imported but sometimes in vertical intra industry strategy comparative advantage has been gained.
  • Developed countries will gain more economic benefit if they adopt for horizontal and vertical intra industry strategies.

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