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international trade
the exchange of capital, goods and services across nation states
involves the sale of exports and imports
exports
goods and services sold overseas to buyers
imports
foreign goods and services bought by domestic households and firms
factor endowment
quantity & quality of factors of production available in the country
such as natural resources and human capital
benefits of international trade
increased competition
lower prices
greater choices
acquisition of resources
more foreign exchange earnings
access to larger markets
economies of scale
more efficient resource allocation
more efficient production
terms of trade
ratio of export prices to import prices
a measure that reflects changes in the average prices received for a basket of exports against those average prices paid for a basket of imports
ToT = (export price index / import price index) x 100
