Unit 14.1

Question 1

What are the benefits of trade?

Answer 1

Availability of Goods and Services

International trade expands product availability, enhancing lifestyle and business operations by introducing a diverse range of goods that meet various consumer needs and preferences.

Increased Competition

More competition reduces prices and improves quality, pushing businesses towards innovation and efficiency, which benefits consumers through better choices and value.

Productive Efficiency

Global competition prompts companies to optimize production, adopt new technologies, and improve efficiency, reducing costs and enhancing product quality.

Allocative Efficiency

Countries trade to focus on producing goods they’re most efficient at, improving global resource use and increasing economic welfare through specialization.

Learning

Exposure to foreign markets and practices drives innovation and efficiency in local firms, fostering growth and technological advancement.

Access to Markets

Global market access allows companies to expand their customer base and increase sales, crucial for growth, especially in niche sectors.

Economies of Scale

Exporting enables companies to lower unit costs by spreading fixed costs over a larger output, making products more competitive internationally.

Production Costs

Accessing global inputs lowers production costs, enhancing business competitiveness and enabling innovation in industries reliant on specific resources.

Source of Foreign Exchange

Exports provide essential foreign currency for developing countries to finance imports and development, supporting economic growth and stability.