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Unit 7: International trade - Coggle Diagram
Unit 7: International trade
Trade deficit: when imports exceed exports
trade surplus: when exports exceed imports
Trade profile
Canada is biggest partner
Leads with volume of imports and exports
Trade surplus in 2018. services exports exceeded import of services by R 270 billion
Deficit in goods 2018 imports exeeded exports in US R891 bilion
Why trade?
efficient production of various goods requires different technologies and not all nations are on the same level of expertise.
Product are differentiated as to quality and other attributes, and some people may prefer certain goods imported rather than locally produced goods.
Distribution of natural human and capital resources id uneven. endowments of resources differ per country
markets
Products requiring relativley large amount of land to produce
Capital intensive goods: products that require relatively large amount of capital to produce
Labor intensive: products requiring relativly large amount of labour to produce
Comparative advantage
Specialization and international trade increase the productivity of the US and allow them to obtain freater total output .
if a product can be produced at lower opportunity cost than others.
Absolute advantage: if a product is more efficient than other countries, if a country can produce more output from any amount of resource inputs than other countries.
the principle of comparitve advangtage. the proposition that an individual region or nation will benefit if it specializes for other desired products. it opportuninity cost are lower than the opportunitity cost of a partner.