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The theories of International Trade and International Investment - Coggle…
The theories of International Trade and International Investment
International Trade in General and its Importance
political, social, cultural, or commercial events and activities, and international trade.
Mercantilism
Emergence of economies based on commerce.
Promoted exports and discouraged imports
Adam Smith and the Theory of Absolute
Advantage
Cost on labor force
countries should only produce goods in which they have an absolute advantage.
Economic System - Minimum Government interference
David Ricardo and the Theory of Comparative
Advantage
Nations can gain an international trade advantage when they focus on producing goods that produce the lowest opportunity costs as compared to other nations
The Heckscher–Ohlin (Factor Proportions) Model
The assumption of two productive factors, capital and labor, allows for
the introduction of another realistic feature in production
Raymond Vernon and the Product Life Cycle
Theory of Trade
Product life cycle
United States exports strength
Foreign production starts
Foreign production becomes competitive in export markets
Import competition begins.
Contemporary Trade Theories
Porter’s Diamond of National Advantage
nation attains a competitive advantage if its firms
are competitive
Innovation
Improvements
Factor Conditions
labor, land, natural resources, capital, and infrastructure
Demand Conditions
Higher quality in products
Understands wants/needs
Related and Supporting Industries
Firms competitions