Give geographycal reasons:-
1) trade at international level is a more complex
Answers
Answer:
Globalization and International Trade
Before we begin a discussion about why nations trade, it would be helpful to take a moment to consider the character and evolution of trade. It is important to keep in mind, first, that although we frequently talk about trade “between nations,” the vast majority of international transactions today take place between private individuals and private enterprises based in different countries. Governments sometimes sell things to each other, or individuals or corporations in other countries, but these comprise only a small percentage of world trade.
Trade is not a modern invention. International trade today is not qualitatively different from the exchange of goods and services that people have been conducting for thousands of years. Before the widespread adoption of currency, people exchanged goods and some services through bartering—trading a certain quantity of one good or service for another good or service with the same estimated value. With the emergence of money, the exchange of goods and services became more efficient.
Developments in transportation and communication revolutionized economic exchange, not only increasing its volume but also widening its geographical range. As trade expanded in geographic scope, diversity, and quantity, the channels of trade also became more complex. Individuals conducted the earliest transactions in face-to-face encounters. Many domestic transactions, and some international ones, still follow that pattern. However, over time, the producers and the buyers of goods and services became more remote from each other.
A wide variety of market actors, individuals and firms, emerged to play supportive roles in commercial transactions. These “middlemen,” wholesalers, providers of transportation services, providers of market information, and others, facilitate transactions that would be too complex, distant, time-consuming, or broad for individuals to conduct face-to-face efficiently.
International trade today differs from economic exchange conducted centuries ago in its speed, volume, geographic reach, complexity, and diversity. However, it has been going on for centuries, and its fundamental character, the exchange of goods and services for other goods and services or money, remains unchanged.
That brings us to the question of why nations trade. Nations trade a lot, but it is not quite as obvious why they do so. Put differently, why do private individuals and firms take the trouble of conducting business with people who live far away, speak different languages, and operate under different legal and economic systems, when they can trade with fellow citizens without having to overcome any of those obstacles?
It seems evident that if one country is better at producing one good and another country is better at producing a different good (assuming both countries demand both goods) that they should trade. What happens if one country is better at producing both goods? Should the two countries still trade? This question brings into play the theory of comparative advantage and opportunity costs.
The everyday choices that we make are, without exception, made at the expense of pursuing one or several other choices. When you decide what to wear, what to eat for dinner, or what to do on Saturday night, you are making a choice that denies you the opportunity to explore other options.
The same holds for individuals or companies producing goods and services. In economic terms, the amount of the good or service that is sacrificed to produce another good or service is known as opportunity cost. For example, suppose Switzerland can produce either one pound of cheese or two pounds of chocolate in an hour. If it chooses to produce a pound of cheese in a given hour, it forgoes the opportunity to produce two pounds of chocolate. The two pounds of chocolate, therefore, is the opportunity cost of producing the pound of cheese. They sacrificed two pounds of chocolate to make one pound of cheese.
A country is said to have a comparative advantage in whichever good has the lowest opportunity cost. That is, it has a comparative advantage in whichever good it sacrifices the least to produce. In the example above, Switzerland has a comparative advantage in the production of chocolate. By spending one hour producing two pounds of chocolate, it gives up producing one pound of cheese, whereas, if it spends that hour producing cheese, it gives up two pounds of chocolate.
Thus, the good in which comparative advantage is held is the good that the country produces most efficiently (for Switzerland, it is chocolate). Therefore, if given a choice between producing two goods (or services), a country will make the most efficient use of its resources by producing the good with the lowest opportunity cost, the good for which it holds the comparative advantage.
Answer:
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