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NEW TRADE THEORY - Coggle Diagram
NEW TRADE THEORY
New Trade Theory (NTT) is an economic theory developed in the 1970s to predict international trade patterns. NTT claims that economies of scale and network effects will benefit from exporting tablets for sale in other countries
The main motivation for developing NTT is that, unlike traditional trade models (or "old trade theories"), most of the world trade takes place between countries and is similar to the foundation in terms of development, structure, and factors
The new trading theory included two new concepts:economies of scale and network effects. By studying the impact of tariffs and trade on the economy. By exploring two new concepts of boundaries and the influence of the Internet. This included studying the impact of globalization on the international economy
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Economies of scale
- Cost advantages companies experience when production becomes efficient, as costs can be spread over a larger amount of goods. A business's size is related to whether it can achieve an economy of scale larger companies will have more cost savings and higher production levels.
- In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced.
- The cost advantage experienced by a firm when it increases its level of output.
First-mover advantage
- Can be simply defined as a firm's ability to be better off than its competitors as a result of being first to market in a new product category.
Pattern of trade
- A country's balance of trade is defined by its net exports (exports minus imports) and is thus influenced by all the factors that affect international trade.
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