international trade oppoutunities

8/12/2019 international trade oppoutunities

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Group Members:Pradeep ChoudharyKunal JoshiMonica JainOmkar palsuledesaiRagini PandeyVijay Gopalakrishnan



Introduction (VIJAY)

The international economy is very complex. Eachcountry has a unique pattern of trade. But every one ofthem must benefit from the trading in order for them todo that. The following example presents a hypotheticalexample of two countries: Japan and China both

producing fish and cloth, and assuming labor is the onlyinput.

The distribution of economic resources andtechnological levels among nations are different.

International trade is a method which enables nations tospecialize and increases the productivity of theirresources. Therefore, nations’ production capacities canbe increased, their production possibility frontier willmove rightward.



omparati e Ad antage(VIJAY)

• Absolute advantage is determined by comparingthe absolute productivity in different countriesof producing each good

• Comparative advantage is determined bycomparing the opportunity cost of each good indifferent countries.

for example:

Output per worker per day in either fish or cloth

JAPAN CHINA

FISH 8 4

CLOTH 4 3



Explanation (VIJAY)

• Japan’s opportunity cost of producing 1 unitof fish (in terms of cloth given up) = 4/8=0.50

•

China’s opportunity cost of producing 1 unitof fish (in terms of cloth given up) = ¾ = 0.75

• Japan’s opportunity cost of producing 1 unit

of cloth (in terms of fish given up) = 8/4 = 2

• China’s opportunity cost of producing 1 unitof cloth (in terms of fish given up) = 4/3 = 1.3



Why does International

Trade exist ??? (PRADEEP)• Uneven distribution of natural resources in different

countries.

• All countries possess diverse strengths andweaknesses in terms of land, labour, capital andtechnology. By focusing on industries withcomparative advantage, cost and operationsefficiencies are reaped via specialization.

• It reduces dependency on domestic market by

expanding customers’ demand in other countries.• It enhances economic growth and contribute

significantly to the country’s Gross Domesticproduct.



(PRADEEP)



OBJECTIVE (PRADEEP)

HIGHER RATE OFPROFIT

EXPAND

PRODUCTIONCAPACITIES

SEVERE

COMPETITION IN

HOME

LIMITED HOME

MARKET

AVAILABILITY OF

TECHNOLOGY &

HUMAN RESOURCE

POLITICAL

STABILITY

HIGH COST

TRANSPORTATION

NEARNESS TO RAWMATERIAL

LIBERALIZATION &GLOBALIZATION

INCREASE MARKET

SHARE

TARIFFS & IMPORT

QUOTAS



BENEFITS (OMKAR)

Choice of goods

Competition

Specialization

Economicinterdependence

http://www.havingtheircake.com/images/cartoons/scaled/globalisation2.jpg



MULTINATIONAL COMPANIES (OMKAR)

http://3.bp.blogspot.com/-qylDoFt2a6E/UPMYYh3rudI/AAAAAAAAAFY/6zPOLO3OLNU/s1600/Reasons---MNC_20wh77hm.jpg



Impacts: (OMKAR)

http://4.bp.blogspot.com/-Zej28lTcnPs/UPMdAn5L-nI/AAAAAAAAAFw/uMneAN2xqeM/s1600/Home-Country_20wh7e87.jpg

http://2.bp.blogspot.com/-FJXHgSbNrBM/UPMcq3aPnOI/AAAAAAAAAFo/EFmnGvRFajw/s1600/Host-Country_20wh7at3.jpg



PEST (OMKAR)

It's actually a tool used for understanding thegrowth of a business, including competitors'.

These four letters mean:

POLITICAL

ECONOMICAL

SOCIAL

TECHNOLOGICAL



OPPORTUNITIES AND THREATS OF AN INTERNATIONAL TRADE

(rAGINI)

http://3.bp.blogspot.com/-K4anu75IvHA/UPMDBtSCZrI/AAAAAAAAAE4/wRHGQf9p5Vk/s1600/Opportunities-of-International-Trade_20wh8kr3.jpg



THREATS (rAGINI)

http://3.bp.blogspot.com/-1E6-Og2XQrs/UPMD0rMBF9I/AAAAAAAAAFE/XFaevyCOey0/s1600/Threats-of-International-Trade_20wh7pxy.jpg

http://2.bp.blogspot.com/_qD9Y8Ncd3I4/ShWbdylrSuI/AAAAAAAACPo/nLeIkA8Xw94/s400/TradeBarrier:CreditLANE.gif



Barriers Quotas Subsidies

Exchange Control Non-barriers Barriers

(rAGINI)

http://2.bp.blogspot.com/_qD9Y8Ncd3I4/ShWbdylrSuI/AAAAAAAACPo/nLeIkA8Xw94/s400/TradeBarrier:CreditLANE.gif



Economic Impacts Of BARRIERS

(rAGINI)

• When a barriers are imposed, domestic consumptiondeclines due to higher prices.

• Domestic production will rise because of the higherprice.

• Imports will fall.

• Government barriers revenue will represent a transferof income from consumers to government.

• Indirect effects also may occur in that relativelyinefficient industries are expanding and relativelyefficient industries abroad have been made to contract.



Exchange Rate (MONICA)

Foreign exchange markets enable internationaltrade to take place by providing markets for theexchange of national currencies. A U.S. firm which

sells goods to a British firm needs to exchange thecheck (in pounds) sent by the British companyinto dollars. U.S. exports create a demand fordollars and a supply of foreign money, pounds in

this case. On the other hand, imports create asupply for dollars and a demand of foreignmoney.



Variable Exchange Rate (MONICA)

• The freely floating exchange rates aredetermined by the forces of demand andsupply.

• The intersection of supply and demandcurves for a currency will determine theprice or exchange rate.

• Theoretically, variable rates have thevirtue of automatically correcting anyimbalance in the balance of payments.



Fixed Exchange Rate (MONICA)

• If the government offers to buy and sell itscurrencies at a set price, it is imposing a fixedexchange rate.

• A nation’s reserves are used to alleviateimbalance in the balance of payments, sinceexchange rates cannot fluctuate to bring

about automatic balance.• Domestic macroeconomic adjustments may

be more difficult under fixed rates.



Managed Floating Exchange Rate

(MONICA)

• The current system is a managed floatingexchange rate system in which governmentsattempt to prevent rates from changing too

rapidly in the short term.• Since 1987, the G-7 nations ( U.S., Germany,

Japan, Britain, France, Italy and Canada)

have periodically intervened in foreignexchange markets to stabilize currencyvalues.



ECONOMIES OF SCALE (KUNAL)

• Purchasing Economies

• Marketing Economies

•

Financial Economies• Managerial Economies

• Human Relations

• Decisions and Co-ordinations• External Diseconomies



The Balance of Payments

(KUNAL)

• The Balance of Payments is the statisticalrecord of a country’s internationaltransactions over a certain period of time

presented in the form of double-entrybookkeeping.

• They are composed of the following:

– The Current Account

– The Capital Account

– The Official Reserves Account



• Current account (export and import)

• Capital account (purchase of US assets byforeigners and foreign assets purchased by

US residence)

• Official reserve account ( US holding of

foreign currencies and US currency heldby foreign governments)

(KUNAL)



CONCLUSION (KUNAL)

With trade, each nation specializes in producing the

commodity of its comparative advantage and faces increasing

opportunity costs. Specialization in production proceeds until

relative commodity prices in the two nations are equalized at

the level at which trade is in equilibrium. By the trading, each

nation ends up consuming on a higher indifference curve than

in the absence of trade. With increasing costs, specialization

in production is incomplete, even in a small nation. The gains

from trade can be broken down into gains from exchange and

gains from specialization in production.



THANK YOU

international trade oppoutunities

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