Introduction
These years, international trade has a huge development in whole society. The definition of international trade is the voluntary exchange of goods or services between organizations and countries (Grimwade, N. 2000). It covered import trade and export trade, and it can be seen as foreign trade as a nation’s angle of view, and it come from social productive forces and state formation. Besides, international trade is very important and necessary to a country’s development. For example, the exports of trade can produce additional economic activity in the domestic economy, such as create more jobs in the local, increase income for the labor. The pressure of import can force local supplier decrease the price of goods and increase the …show more content…
There are two primary theories included in the classical trade theories, Absolute advantage (Adam Smith 1776) and Comparative advantage (David Ricardo 1817). In the 18 century, Adam Smith was published ‘An Inquiry into the Nature and Causes of Wealth of Nations’ to criticise Mercantilists, and present absolute advantage to encourage international trade. About absolute advantage, it suggest that each country should produce and export the goods which they good at, and import the goods which they not good at. In other words, this theory was emphasize the international division of labour and free trade (Nigel, G. 2000). In addition, in the 19 century, David Ricardo was published ‘PrineiPles of Po1itical Econ—omv and Taxation’ and present the Comparative advantage to solve the boundedness of Absolut advantage and develop the theory. David Ricardo (1817) believes that, “A country should produce and export those goods for which it is relatively more efficient than others and import those goods which others are more efficient.” However, people think that the classical trade theories cannot explain the current patterns of trade due to the limitations. To be exact, classical trade theory’s module only use a simple condition, such as, two countries and two products. And there is no transportation costs during the trade, and the resources price is same for both countries. Therefore, people …show more content…
There are main five parts of the theories, Economies of scale, Demand led trade theory, Product Life Cycle, Porter’s diamond theory and clusters, and Paul Krugman trade theories.
Firstly, about economies of scale. It means that average cost will decrease as output increase. And it normally has two patterns of manifestation, internal scale economies and external scale economies. For internal scale economies, the average cost will decrease due to expansion of firms’ size. And for external scale economies, the average cost is not depends on size of firm, it will be changed due to the size of industry and entire industry and clustering of products in specific geographical region. (Grimwade, N.
These years, international trade has a huge development in whole society. The definition of international trade is the voluntary exchange of goods or services between organizations and countries (Grimwade, N. 2000). It covered import trade and export trade, and it can be seen as foreign trade as a nation’s angle of view, and it come from social productive forces and state formation. Besides, international trade is very important and necessary to a country’s development. For example, the exports of trade can produce additional economic activity in the domestic economy, such as create more jobs in the local, increase income for the labor. The pressure of import can force local supplier decrease the price of goods and increase the …show more content…
There are two primary theories included in the classical trade theories, Absolute advantage (Adam Smith 1776) and Comparative advantage (David Ricardo 1817). In the 18 century, Adam Smith was published ‘An Inquiry into the Nature and Causes of Wealth of Nations’ to criticise Mercantilists, and present absolute advantage to encourage international trade. About absolute advantage, it suggest that each country should produce and export the goods which they good at, and import the goods which they not good at. In other words, this theory was emphasize the international division of labour and free trade (Nigel, G. 2000). In addition, in the 19 century, David Ricardo was published ‘PrineiPles of Po1itical Econ—omv and Taxation’ and present the Comparative advantage to solve the boundedness of Absolut advantage and develop the theory. David Ricardo (1817) believes that, “A country should produce and export those goods for which it is relatively more efficient than others and import those goods which others are more efficient.” However, people think that the classical trade theories cannot explain the current patterns of trade due to the limitations. To be exact, classical trade theory’s module only use a simple condition, such as, two countries and two products. And there is no transportation costs during the trade, and the resources price is same for both countries. Therefore, people …show more content…
There are main five parts of the theories, Economies of scale, Demand led trade theory, Product Life Cycle, Porter’s diamond theory and clusters, and Paul Krugman trade theories.
Firstly, about economies of scale. It means that average cost will decrease as output increase. And it normally has two patterns of manifestation, internal scale economies and external scale economies. For internal scale economies, the average cost will decrease due to expansion of firms’ size. And for external scale economies, the average cost is not depends on size of firm, it will be changed due to the size of industry and entire industry and clustering of products in specific geographical region. (Grimwade, N.