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credits https://www.econinja.net/global-economy/4-1-benefits-of-international-trade
what are the benefits of international trade?
increased competition: domestic firms now have to compete in the international market
lower prices: increased competition and economies of scale lower prices
greater choice due to more suppliers
acquisition of resources is easier due to international connections
more foreign exchange earnings
access to larger markets
economies of scale: the more of something is produced, the lower the per-unit cost of that product
more efficient resource allocation
more efficient production
draw the diagram of a domestic market before international trade
draw the diagram of a market when world price is lower than domestic price
at world price, domestic producers are only willing and able to supply Qs, domestic consumers are willing and able to purchase at Qd.
this causes a shortage and the difference has to be imported from abroad.
why is the world price a perfectly price elastic line?
because global trade is assumed to turn markets into a perfect competition
draw the diagram of a market when the world price is higher than domestic price
at the world price, domestic consumers are only willing and and able to purchase Qd
domestic producers are willing and able to produce at Qs
this causes a surplus and the difference will have to be exported to abroad
