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Theories of International Trade and International Investment - Coggle…
Theories of International Trade and International Investment
Theories
Mercantilism:
Economic and Cultural Philosophy
The government should establish economic policies that promote exports and discourage imports
The objective of fostering the growth of national commerce and industry
Absolute Advantage:
Founded by Adam Smith
If it cost twice the labor to kill a beaver as it does to kill a deer, one beaver would exchange for two deer.
Labor was the fundamental measure of value
Laissez-faire
Free competition = Efficient Economy
Contemporary Trade
Globalization
Competitors are important
Theories
Comparative Advantage:
Founded by David Ricardo
Countries could exploit their own advantages and gain from international trade
Determining laws that regulate the distribution
opportunity costs and profits must be the same on all land,
based on what was given up or traded off in producing one product instead of the other
Product Life Cycle
Founded by Raymond Vernon
emphasis on information, uncertainty, and scale economies
many products go through a cycle during which high-income, mass consumption countries are initially exporters, then lose their export markets, and finally become importers of the product.
Four Stages
Factor conditions refer to inputs used as factors of production such as labor, land, natural resources, capital, and infrastructure.
lack of resources often actually helps countries to become competitive
Demand Conditions
demands high quality and a close proximity to such consumers enables the firm to bet- ter understand the needs and desires of the customers
Porter’s Diamond of National Advantage
a nation attains a competitive advantage if its firms are competitive