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Theories of International Trade and International Investment - Coggle…
Theories of International Trade and International Investment
Importance of International Trade
Increases the economic welfare of each country by widening the range of goods and services available for consumption.
Vital for countries economies
Mercantilism
Its seventeenth-century economic and cultural philosophy
That represented the emergence of economies based on commerce
New imports
Nationalism
Theory of absolute advantage
an exchange of goods will take place only if each of the two countries can produce one commodity at an absolutely lower production cost than the other country.
Theory of Comparative Advantage
Each country has to explode its own advantages and gain from international trade
Life cycle theory of trade
The model claims that many products go through a trade cycle
Contemporary Trade theories
No nation has ever developed long term without trade
Trade gives comparative advantages
Scarcity has led to innovations
Porter's Diamond of National Advantage
Factor Conditions
Demand Conditions
Related and supporting Industries
Firm strategy, structure and rivalry
strongly related industries promote competitiveness
sophisticated domestic markets
Factors of production