The paper 'Importance of International Trade for Open Economies' is a great example of a Macro and Microeconomics Assignment. It has helped the UK to develop its domestic industry due to competitiveness which has ensured that the domestic industry looks to compete at a global level and has thereby strengthened its local industry as well. It has provided an opportunity where UK has been able to use international technology to develop their business. This technology transformation has consolidated their business and has provided the required dimensions through which business development has improved International trade has helped to increase sales and profits as it has provided an opportunity where they can trade and sell their products and services to other countries.
This has thereby provided new avenues and has increased the opportunity of carrying out business The risk for the domestic industry has reduced as opportunity to work in different markets has helped to diversify the risk and has thereby provided new and better avenues through which business has increased The process of international trade has further helped to increase their global market share which has thereby helped them to get a global presence.
This has helped UK to ensure that their products are available elsewhere and has thereby multiplied their market share and capacity International trade has also helped UK to earn foreign exchange as trading in currencies of other countries while being involved in trade has increased their foreign holdings. This has helped to strengthen the manner in which UK works and has helped the economy to grow at a faster rate The dependence on present market has reduced as availability of other markets through which international trade can be carried out has increased their overall reach and has helped to increase the bargaining power.
The process has led towards ensuring that the society is conserved and the people don’ t have to pay more thereby ensuring better customer satisfaction Thus, the above are some of the different benefits which UK has been able to get due to international trade and has helped the economy to grow at a rapid pace. Comparative Advantage It is defined as an advantage which an economy has over another economy when it is able to produce goods and services at a lower opportunity cost compared to its trading partner.
To put it in simple words it means that economies should look towards producing those goods which provides them the least inefficiency as compared to other producing nations since the economy doesn’ t specializes in the production of any goods and services. Absolute Advantage It refers to the fact that economies should look to produce and specialize those goods where they have an advantage and will be able to produce the goods and services at the lowest cost possible or by using fewer resources.
The production provides an advantage as the economy is able to gain specialization as compared to other economies. Terms of Trade It is the trade index which is calculated by dividing the index of goods which have been exported by the index of goods which have been imported. It helps to provide a clear indication of the exchange and imports which has taken place in the UK and thereby helps to determine the trade which has taken place