![]() When Irish residents go abroad on holidays, they buy hotel and restaurant services from other countries, and this adds to Irish imports. Because of this, the total imports and exports are much greater than what passes through our territory (see Contract Manufacturing). ![]() Similarly, an Irish company can sell goods it owns in another country to a company abroad and that is still an Irish export because the ownership left Ireland, even though the goods were never here. Imports into Ireland are counted when an Irish resident person or company buys from abroad, even if the purchase does not come into the country. Imports and Exports of goods that physically cross the frontier into the country are described in detail in Goods Exports and Imports but the definition in National Accounts is wider than that. On the other hand, we export a lot of meat, dairy produce, pharmaceuticals and IT services, since we produce more than we consume here. Avocados and cars are goods imports, and streaming TV is a service import. Most of what we consume of these are imports. Point X, however, is unattaible with existing resources and technology if trade does not occur.In Ireland we do not produce many avocados, cars or streaming television shows. Production Possibilities Frontier: If production is efficient, the economy can choose between combinations on the PPF. If production is efficient, the economy can choose between combinations (i.e., points) on the PPF: B if guns are of interest, C if more butter is needed, or D if an equal mix of butter and guns is required. For example, if an economy that produces only guns and butter is operating on the PPF, the production of guns would need to be sacrificed in order to produce more butter. An economy that is operating on the PPF is productively efficient, meaning that it would be impossible to produce more of one good without decreasing the production of the other good. PPFs are normally drawn as extending outward around the origin, but can also be represented as a straight line. It shows the maximum possible production level of one commodity for any production level of another, given the existing levels of the factors of production and the state of technology. In economics, the production possibility frontier (PPF) is a graph that shows the combinations of two commodities that could be produced using the same total amount of the factors of production. ![]() Explain the benefits of trade and exchange using the production possibilities frontier (PPF).To summarize, international trade benefits mostly all incumbents and generates substantial value for the global economy. Benefits of increased competition: A greater degree of competition leads to lower prices for consumers, greater responsiveness to consumer wants and needs, and a wider variety of products.Efficiency gains: Domestic firms will be forced to become more efficient in order to be competitive in the global market.International connections also help promote diplomatic (rather than military) solutions to international problems. Political benefits: Countries can leverage trade to forge closer cultural and political bonds.Gains from specialization: Countries may gain economies of scale from specialization, experiencing long run average cost declines as output increases.Japan may be able to produce technological goods of superior quality, but it may lack many natural resources. Saudi Arabia may have a lot of oil, but perhaps not enough lumber. Differences in factor endowments: Countries have different amounts of land, labor, and capital.In addition to comparative advantage, other reasons for trade include: International Trade: Countries benefit from producing goods in which they have comparative advantage and trading them for goods in which other countries have the comparative advantage. In other words, each nation should produce goods for which its domestic opportunity costs are lower than the domestic opportunity costs of other nations and exchange those goods for products that have higher domestic opportunity costs compared to other nations. Trading-partners reap mutual gains when each nation specializes in goods for which it holds a comparative advantage and then engages in trade for other products. International trade is the exchange of capital, goods, and services across international borders or territories. Discuss the reasons that international trade may take place.Relationship Between Specialization and Trade.Absolute Advantage Versus Comparative Advantage.
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