The automotive component industry o India and the semiconductor industry in Malaysia are illustrations of external economies of scale. Hence these countries have become the optimal locations for labor-intensive industries like textiles and garments.
He opined that even if two countries have similar per capita incomes, differing distributions of total income in the two countries can lead to intra-industry trade.
Local suppliers and complementary industries. The ability to differentiate or produce a different product is termed as an advantage in product technology, while the ability to produce a homogeneous product more efficiently is termed as an advantage in process technology.
In monopolistic competition, there are many firms in the industry and easy entry and exit.
These theories may be classified on the basis of two elements: In case of petroleum, the domestic demand in the oil-rich countries is extremely limited. The horizontal and vertical axes show the consumption of a typical good by any representative consumer in the economy, that is, per capita consumption, c and the ratio between the price of the good and the wage rate, respectively.
Comparative advantage may be defined as the inability of a nation to produce a good more efficiently than other nations, but its ability to produce that good more efficiently compared to the other good. The larger and smaller magnitude of demand overlap will determine correspondingly the larger or smaller potential and actual volume of trade and the levels of income in the two trading countries.
The line OP starting from origin expresses the relation between products and per capita incomes. Local market resources and capabilities factor conditions.
Linder has not dwelt upon the composition of trade between the two countries. In fact, most commodities can differ in both quality and characteristics, but for analytical convenience we keep the two cases distinct.
It can utilize the remaining 25 units of its additional resources for producing 6. Presently, gold represents only a minor proportion of national foreign exchange reserves. For instance, the agro-climatic condition in India is an important factor for sizeable export of agro-produce, such as spices, cotton, tea, and mangoes.
The barriers to entry that corporations may seek to optimize include: The Product Cycle Theory: According to Avinash Dixit and Joseph Stiglitz and Micheal Spence behind the demand for differentiated goods there is simply the desirability of variety as such, which is implicit in the traditional convex to the origin indifference curves.
Mercantilist policies were used by colonial powers as a means of exploitation, whereby they charged higher prices from their colonial markets for their finished industrial goods and bought raw materials at much lower costs from their colonies.The trade theories of Adam Smith and David Ricardo viewed the determination of competitiveness from the demand side of the market.
False The principle of absolute advantage asserts that mutually beneficial trade can occur even if one nation is absolutely more efficient in the production of all goods. Linder Hypothesis is an economic hypothesis that posits countries with similar per capita income will consume similar quality products, and that this should lead to them trading with each other.
Inability of the county based theories to explain and predict the existence and growth of intra-industry trade 3. Failure of Leontief and other researchers to empirically validate Heckscher-Ohlin theory. “overlapping demand,” which provides an explanation of trade structure in terms of aggregate demand.
Attention is drawn to new developments in trade. Overlapping Demand Is Different From The Other Trade Theories CHAPTER 5: INTERNATIONAL TRADE THEORY QUICKNOTES IN GLOBAL INTERNATIONAL TRADE Condensed by: Group 2 7 THEORIES OF INTERNATIONAL TRADE: 1.
Mercantilism 2. Absolute Advantage 3. Comparative Advantage 4. Heckscher-Ohlin Theory 5. Overlapping demand theory Intra-industry trade theory a. explains why the United States might export autos and import clothing *b. explains why the United States might export and import differentiated versions of the same product, such as different types of autos c.
assumes that transport costs are very low or do not exist d%(7).Download