Upload
others
View
9
Download
1
Embed Size (px)
Citation preview
INTERNATIONAL TRADE
Chapter 4
5 UNITS
Theories of International Trade
Trade Negotiations
Exchange Rates & Economic Effects
The Instruments of Trade Policy
International Capital Movement
1
2
3
4
5
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Click on the icons of social media on tree to connect with CA Mayank Kothari for latest Updates & Videos
YouTube and Telegram is important.
Important Links
If any of the link doesn’t work, try searching CA Mayank Kothari in respective platform.
Download Notes for Other Chapters
Introduction
�4
International trade is the exchange o f goods and services as well as resources between countries.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Introduction
�5
It involves transactions between residents of different countries.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
/ International trade is the exchange of goods and services as well as resources between countries.
It involves transactions between residents of different countries.
Introduction
1. heterogeneity of customers and currencies,
2. differences in legal systems,
3. more elaborate documentation,
4. diverse restrictions in the form of taxes,
5. regulations,
6. duties,
7. tariffs,
8. quotas,
9. trade barriers,
10. standards,
11. restraints to movement of specified goods and services and
12. issues related to shipping and transportation.
�6
Compared to internal trade, international trade has greater complexity as it involves
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
#01
ARGUMENTS IN SUPPORT OF INTERNATIONAL TRADE
• I n t e r n a t i o n a l t r a d e i s a p o w e r f u l s t i m u l u s t o e c o n o m i c e f f i c i e n c y a n d c o n t r i b u t e s t o e c o n o m i c g r o w t h a n d r i s i n g i n c o m e s .
• I t c o m p e l s m a n u f a c t u r e r s , e s p e c i a l l y i n d e v e l o p i n g c o u n t r i e s t o e n h a n c e e f f i c i e n c y a n d p r o f i t a b i l i t y b y a d o p t i o n o f c o s t r e d u c i n g t e c h n o l o g y a n d b u s i n e s s p r a c t i c e s .
• I t w i l l r e d u c e t h e l i k e l i h o o d o f d o m e s t i c m o n o p o l y .
• T r a d e p r o v i d e s a c c e s s t o n e w m a r k e t s a n d n e w m a t e r i a l s a n d e n a b l e s s o u r c i n g o f i n p u t s a n d c o m p o n e n t s i n t e r n a t i o n a l l y a t c o m p e t i t i v e p r i c e s
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
#01
ARGUMENTS IN SUPPORT OF INTERNATIONAL TRADE• I n t e r n a t i o n a l t r a d e
e n h a n c e s t h e e x t e n t o f m a r k e t a n d a u g m e n t s t h e s c o p e f o r m e c h a n i z a t i o n a n d s p e c i a l i s a t i o n .
• E x p o r t s s t i m u l a t e e c o n o m i c g r o w t h b y c r e a t i n g j o b s , w h i c h c o u l d p o t e n t i a l l y r e d u c e p o v e r t y a n d a u g m e n t i n g f a c t o r i n c o m e s a n d i n s o d o i n g r a i s i n g s t a n d a r d s o f l i v e l i h o o d a n d o v e r a l l d e m a n d f o r g o o d s a n d s e r v i c e s
• C o u n t r i e s c a n g a i n f u l l y d i s p o s e o f f t h e i r s u r p l u s o u t p u t a n d , t h u s , p r e v e n t u n d u e f a l l i n d o m e s t i c p r i c e s c a u s e d b y o v e r p r o d u c t i o n .
• I n t e r n a t i o n a l T r a d e a l s o a l l o w s n a t i o n s t o m a i n t a i n s t a b i l i t y i n p r i c e s a n d s u p p l y o f g o o d s d u r i n g p e r i o d s o f n a t u r a l c a l a m i t i e s l i k e f a m i n e , f l o o d , e p i d e m i c e t c .
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
#01
ARGUMENTS IN SUPPORT OF INTERNATIONAL TRADE• T r a d e c a n a l s o c o n t r i b u t e
t o h u m a n r e s o u r c e d e v e l o p m e n t , b y f a c i l i t a t i n g f u n d a m e n t a l a n d a p p l i e d r e s e a r c h a n d e x c h a n g e o f k n o w - h o w a n d b e s t p r a c t i c e s b e t w e e n t r a d e p a r t n e r s .
• T r a d e s t r e n g t h e n s b o n d s b e t w e e n n a t i o n s b y b r i n g i n g c i t i z e n s o f d i f f e r e n t c o u n t r i e s t o g e t h e r i n m u t u a l l y b e n e f i c i a l e x c h a n g e s a n d , t h u s , p r o m o t e s h a r m o n y a n d c o o p e r a t i o n a m o n g n a t i o n s .
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Economic Growth and Rising Income
Enhanced Efficiency and Profitability
Reduction in Domestic Monopoly
Inputs at Competitive Prices
Enhance the Scope of Mechanisation and Specialisation
Generating Employment & Raising Standards of Livelihood
Prevent Undue Fall in Domestic Prices Due to Overproduction
Supply of Goods During Natural Calamities
Contributes to Human Resource Development
Strengthens Bonds Between Nations
01020304050607080910
ARGUMENTS IN SUPPORT OF INTERNATIONAL TRADE
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
#02
ARGUMENTS AGAINST THE INTERNATIONAL TRADE
• P o s s i b l e n e g a t i v e l a b o u r m a r k e t o u t c o m e s i n t e r m s o f l a b o u r - s a v i n g t e c h n o l o g i c a l c h a n g e t h a t d e p r e s s d e m a n d f o r u n s k i l l e d w o r k e r s , l o s s o f l a b o u r e r s ’ b a r g a i n i n g p o w e r , d o w n w a r d p r e s s u r e o n w a g e s o f s e m i s k i l l e d a n d u n s k i l l e d w o r k e r s a n d f o r c e d w o r k u n d e r u n f a i r c i r c u m s t a n c e s a n d u n h e a l t h y o c c u p a t i o n a l e n v i r o n m e n t s .
• I n t e r n a t i o n a l t r a d e i s o f t e n c r i t i c i z e d f o r i t s e x c e s s i v e s t r e s s o n e x p o r t s a n d p r o f i t - d r i v e n e x h a u s t i o n o f n a t u r a l r e s o u r c e s d u e t o u n s u s t a i n a b l e p r o d u c t i o n a n d c o n s u m p t i o n .
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
#02
ARGUMENTS AGAINST THE INTERNATIONAL TRADE
• P r o b a b l e s h i f t t o w a r d s a c o n s u m e r c u l t u r e a n d c h a n g e i n p a t t e r n s o f d e m a n d i n f a v o u r o f f o r e i g n g o o d s w h i c h a r e l i k e l y t o o c c u r i n l e s s d e v e l o p e d c o u n t r i e s m a y h a v e a d v e r s e e f f e c t o n t h e d e v e l o p m e n t o f d o m e s t i c i n d u s t r i e s a n d m a y e v e n t h r e a t e n t h e s u r v i v a l o f i n f a n t i n d u s t r i e s .
• R i s k y d e p e n d e n c e o f u n d e r d e v e l o p e d c o u n t r i e s o n f o r e i g n n a t i o n s i m p a i r s e c o n o m i c a u t o n o m y a n d e n d a n g e r s t h e i r p o l i t i c a l s o v e r e i g n t y . S u c h r e l i a n c e o f t e n l e a d s t o w i d e s p r e a d e x p l o i t a t i o n a n d l o s s o f c u l t u r a l i d e n t i t y .
• I m p o r t o f h a r m f u l p r o d u c t s m a y c a u s e h e a l t h h a z a r d s a n d e n v i r o n m e n t a l d a m a g e . ( e . g . C h i n e s e p r o d u c t s ) .
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
#02
ARGUMENTS AGAINST THE INTERNATIONAL TRADE
• I n s t e a d o f c o o p e r a t i o n a m o n g n a t i o n s , t r a d e m a y b r e e d r i v a l r y o n a c c o u n t o f s e v e r e c o m p e t i t i o n
• T h e r e a r e m a n y r i s k s i n t r a d e w h i c h a r e a s s o c i a t e d w i t h c h a n g e s i n g o v e r n m e n t s ’ p o l i c i e s o f p a r t i c i p a t i n g c o u n t r i e s , s u c h a s i m p o s i t i o n o f a n i m p o r t b a n o r t r a d e e m b a r g o e s .
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Depressed Demand of Unskilled and Semiskilled workers
Exhaustion of Natural Resources
Threat to the Survival of Domestic Industries
Loss of Cultural Identity
Harmful Imports Will Damage Environment and Health
Rivalry on Account of Severe Competition
Risk of Trade Embargoes
01020304050607
ARGUMENTS AGAINST THE INTERNATIONAL TRADE
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Maximise Exports & Minimise ImportsMercantilism advocated maximizing exports in order to bring in more “specie” (precious metals) and minimizing imports through the state imposing very high tariffs on foreign goods.
86%
Trade is a ‘zero-sum game’This view argues that trade is a ‘zero-sum game’, with winners who win does so only at the expense of losers and one country’s gain is equal to another country’s loss, so that the net change in wealth or benefits among the participants is zero.
0
This theory have many shortcomingsThe arguments put forth by mercantilists were later proved to have many shortcomings by later economists. Although it is still very important theory which explains policies followed by many big and fast growing economies in Asia.
~
Collect precious metals to become richNational wealth and power are best served by increasing exports and collecting precious metals in return. Mercantilists also believed that the more gold and silver a country accumulates, the richer it becomes.
The Mercantilist View of International Trade
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THE THEORY OF ABSOLUTE ADVANTAGE
Adam Smith was the first to put across the possibility that international trade is
not a zero-sum game
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THE THEORY OF ABSOLUTE ADVANTAGEAccording to Adam Smith who supported unrestricted trade and free international competition, absolute cost advantage is the determinant of mutually beneficial international trade.
The absolute cost advantage theory points out that a country will specialize in the production and export of a commodity in which it has an absolute cost advantage.
In other words, exchange of goods between two countries will take place only if each of the two countries can produce one commodity at an absolutely lower production cost than the other country.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
2 X 2 M O D E L
Country A Country B
Wheat (Bushels/Hour) 6 1
Cloth (Yards/Hour) 4 5
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
2 X 2 M O D E L
Country A Country B
Wheat (Bushels/Hour) 6 1
Cloth (Yards/Hour) 4 2
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THE THEORY OF COMPARATIVE ADVANTAGE
David Ricardo developed the classical theory of comparative advantage in his book
‘Principles of Political Economy and Taxation’ published in 1817
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
The law of comparative advantage states that even if one nation is less efficient than (has an absolute disadvantage with respect to) the other nation in the production of all commodities, there is still scope for mutually beneficial trade.
The first nation should specialize in the production and export of the commodity in which its absolute disadvantage is smaller (this is the commodity of its comparative advantage) and import the commodity in which its absolute disadvantage is greater
THE THEORY OF COMPARATIVE ADVANTAGE
Commodity Absolute Disadvantage
Export Smaller
Import Greater
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
2 X 2 M O D E L
Country A
Country B
Wheat (Bushels/Hour) 6 1
Cloth (Yards/Hour) 4 2
Absolute Disadvantage
Absolute Disadvantage
Absolute Advantage
Absolute Advantage
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Country A Country B
Wheat (Bushels/Hour) 6 1
Cloth (Yards/Hour) 4 2
Comparative Cost
Comparative Advantage in Wheat
Comparative Advantage in Cloth
Terms of Trade
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Planes Cruise Ships
US 20 2
France 12 2
Comparative Cost
Comparative Advantage in Planes
Comparative Advantage in Cruise
Terms of Trade
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Car Motorcycles
Korea 3 9
Germany 4 8
Comparative Cost
Comparative Advantage in car
Comparative Advantage in motorcycle
Terms of Trade
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Laptop Phones
China 4 12
Japan 1 5
Comparative Cost
Comparative Advantage in laptop
Comparative Advantage in phones
Terms of Trade
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
HECKSCHER -OHLIN THEORY OF TRADE
The Heckscher-Ohlin theory of trade, (named after two Swedish economists, Eli Heckscher
and his student Bertil Ohlin), also referred to as
1. Factor-Endowment Theory of Trade 2. Modern Theory of Trade 3. Heckscher-Ohlin-Samuelson theorem
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
HECKSCHER -OHLIN THEORY OF TRADE
Based on
Factor Endowment Amount of labor, land, money and entrepreneurship that could be exploited for manufacturing within a country. Countries with large factor endowments are often financially better off than countries
with less factor endowment
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
LABOUR CAPITAL
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�40
0
15
30
45
60
Country A
Country A
Labour Capital
0
15
30
45
60
Country A
Country B
Labour Capital
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�41
0
15
30
45
60
Country A
Country A
Labour Capital
Export
0
15
30
45
60
Country A
Country B
Labour Capital
Export
Import
Import
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THE HECKSCHER -OHLIN THEORY OF TRADEThe theory states that a country’s exports depend on its resources endowment i.e. whether the country is capital-abundant or labour-abundant.
- If a country is a capital abundant one, it will produce and export capital-intensive goods relatively more cheaply than another country.
- Likewise, a labour-abundant country will produce and export labour-intensive goods relatively more cheaply than another country.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Labour Abundant Country
The labour-abundant countries have
comparative cost advantage in the
production of goods which require labour-intensive technology
Capital Abundant Country
capital-abundant countries have
comparative cost advantage in the
production of goods that need capital-intensive
technology.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�44
The Heckscher-Ohlin theory of foreign trade can be stated in the form of two theorems namely
2
1 Heckscher-Ohlin Trade Theorem
2
1
Factor-Price Equalization Theorem.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�45
1 Heckscher-Ohlin Trade Theorem
The Heckscher-Ohlin Trade Theorem establishes that a country tends to specialize in the export of a commodity whose production requires intensive use of its abundant resources and imports a commodity whose production requires intensive use of its scarce resources.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�46
The Factor-Price Equalization Theorem states that international trade tends to equalize the factor prices between the trading nations.
In the absence of foreign trade, it is quite likely that factor prices are different in different countries.
2 Factor-Price Equalization Theorem.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�47
2 Factor-Price Equalization Theorem.
0
15
30
45
60
Country A
Wages
US India
0
15
30
45
60
Country A
Capital
US India
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�48
2 Factor-Price Equalization Theorem.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�49
2 Factor-Price Equalization Theorem.
0
15
30
45
60Wages
Before After
0
12.5
25
37.5
50Capital
Before After
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�50
2 Factor-Price Equalization Theorem.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�51
2 Factor-Price Equalization Theorem.- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�52
2 Factor-Price Equalization Theorem.
0
15
30
45
60Capital
Before After
0
12.5
25
37.5
50Wages
Before After
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�53
2 Factor-Price Equalization Theorem.
0
15
30
45
60
Country A
Wages
US India
0
15
30
45
60
Country A
Capital
US India
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
�54
2 Factor-Price Equalization Theorem.
0
13.75
27.5
41.25
55
Country A
Wages
US India0
13.75
27.5
41.25
55
Country A
Capital
US India
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Theory of Comparative Cost Modern Theory
Basis of difference
The basis of the difference between countries is comparative costs
Explains the causes of differences in comparative costs as differences in factor endowments
Based on Based on labour theory of value Based on money cost which is more realistic.
One and two factor model
Considered labour as the sole factor of production and presents a one-factor (labour) model
Widened the scope to include labour and capital as important factors of production. This is 2-factor model and can be extended to more factors.
International trade
Treats international trade as quite distinct from domestic trade
International trade is only a special case of inter-regional trade.
Difference in Comparative advantage
Attributes the differences in comparative advantage to differences in productive efficiency of workers
Attributes the differences in comparative advantage to the differences in factor endowments.- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Theory of Comparative Cost Modern Theory
Factor Price differences
Does not take into account the factor price differences
Considers factor price differences as the main cause of commodity price differences
Nature Normative; tries to demonstrate the gains from international trade
Positive; concentrates on the basis of trade
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
NEW TRADE THEORY (NTT)New Trade Theory (NTT) is an economic theory that was developed in the 1970s as a way to understand international trade patterns.
NTT came about to help us understand why developed and big countries are trade partners when they are trading similar goods and services. These countries constitute more than 50% of world trade.
Paul Krugman
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
This is particularly true in key economic sectors such as electronics, IT, food, and automotive. We have cars made in the India, yet we purchase many cars made in other countries.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
The mobile phones we use are a good example. India produces them and also imports them.
NTT argues that, because of substantial economies of scale and network effects, it pays to export phones to sell in another country.
Those countries with the advantages will dominate the market, and the market takes the form of monopolistic competition.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Monopolistic competition tells us that the firms are producing a similar product that isn't exactly the same, but awfully close. According to NTT, two key concepts give advantages to countries that import goods to compete with products from the home country:
E C O N O M I E S O F S C A L E
N E T W O R K E F F E C T S
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
ECONOMIES OF SCALE
As a firm produces more of a product its cost per unit keeps going down. So if the firm serves domestic as well as foreign market instead of just one, it can reap the benefit of large scale of production consequently the profits are likely to be higher.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
NETWORK EFFECTSNetwork effects are the way one person’s value of a good or service is affected by the value of that good or service to others.
The value of the product or service is enhanced as the number of individuals using it increases. This is also referred to as the ‘bandwagon effect’.
Consumers like more choices, but they also want products and services with high utility, and the network effect offers increased utility from these products over others.
A good example will be Mobile App such as Whats App and software like Microsoft Windows.
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THEORIES OF INTERNATIONAL TRADEArguments in Support and Against of International Trade01
03 The Theory of Absolute Advantage
0204
The Theory of Comparative Advantage
The Mercantilist View of International Trade
05 The Heckscher-Ohlin Theory of Trade06
Comparison Between Theory of Comparative Cost and Modern Theory07 New Trade Theory an
Introduction08
Introduction
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
INTERNATIONAL TRADE
Chapter 4
5 UNITS
Theories of International Trade
Trade Negotiations
Exchange Rates & Economic Effects
The Instruments of Trade Policy
International Capital Movement
1
2
3
4
5
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
THANK YOU
www.caconnect.inB U Y L E C T U R E S
CA Mayank KothariJ O I N Y O U T U B E
- CA Mayank Kothari | CA Inter FM-ECO |Paper 8 | Video Lectures at caconnect.in
Unit I NATIONAL INCOME ACCOUNTING
Unit II THE KEYNESIAN THEORY
Unit I FISCAL FUNCTIONS
Unit I MARKET FAILURE
Unit III GOVERNMENT INTERVENTION TO CORRECT MARKET FAILURE
Unit IV FISCAL POLICY
Unit I THE CONCEPT OF MONEY DEMAND
Unit II THE CONCEPT OF MONEY SUPPLY
Unit III MONETARY POLICY
Unit I THEORIES OF INTERNATIONAL TRADE
Unit II THE INSTRUMENTS OF TRADE POLICY
Unit III TRADE NEGOTIATIONS
Unit IV EXCHANGE RATES AND IT’S ECONOMIC EFFECTS
Unit V INTERNATIONAL CAPITAL MOVEMENTS
Chapter 1: Determination of National Income
Chapter 2: Public Finance
Chapter 3: Money Market
Chapter 4: International Trade
To watch the videos tap the respective unit | Video Lectures at w
ww.caconnect.in
CA Inter | Economics | Paper 8 | Revision Videos by CA Mayank Kothari
Associated FacultiesCA Parveen Jindal
CA Swapnil Patni
CA V K Agrawal
CA Sarthak Jain
CA Aarti Lahoti
CA Dippak Gupta
CA Bhanwar Borana CA Farooq Haque
CA Abhishek Bansal CA Sankalp Kanstiya
CA Ravi Taori CA Mayank Kothari
Accounts & Financial Reporting Financial Reporting & Audit
Corporate Law & FM Eco Audit
GST & CustomsFinancial Reporting
Direct Taxes GST & Customs
Audit and Law Costing
Audit FM ECO, SFM, FSCM
CA Vinod Reddy
CA Ravi Sonkhiya
CA Purushottam Agrawal
CA Rakesh Agrawal
CA Rachana Ranade
CA Manoj Batra
CA Ankita Patni CA Mahesh Gour
CA Sanidhya Saraf CA Jai Chawla
CA Ravi Shanker CA Shivangi Agarwal
Costing Audit
GST & CustomsCosting
Law GST & Customs
Audit Financial Reporting
Costing Economics for Finance
Costing Costing
Associated Faculties