ECS3702
SUMMARISED
STUDY
NOTES 2022
Created by Achievers Tutorial Centre (Pretoria Campus) - 078 628 2401
CHAPTER ONE
WORLD TRADE AND THE
... [Show More] NATIONAL ECONOMY
International Economics
It is concerned with the exchange of goods, services, factors of production and capital
across national boundaries.
International Trade
The reasons for and the benefits/gains from international trade are no different from
those associated with domestic transactions - as with domestic transactions,
international transactions offer the benefits of specialisation, allowing us to gain
increased output from a given amount of inputs. Voluntary trade is therefore held to
be mutually beneficial, increasing the economic welfare of all parties involved in such.
It is the conduct of trade, rather than the benefits that flow from it, that distinguish
international transactions from domestic transactions. Differences in the way in which
international trade is conducted arise as a result of influences such as:
Exchange rates: transactions within a country are financed by that country's own
currency. International transactions, on the other hand, require, for example, that
importers convert their own currency into the currency of the country from which
they are purchasing the imported goods. Such conversion takes place via
exchange rates, which are subject to change, and therefore introduce an element
of risk into such transactions that does not occur with domestic transactions;
Commercial policies: a national government may impose a variety of restrictions
upon international transactions that cannot be imposed upon domestic
transactions. Examples may include tariffs, import quotas, export subsidies and
exchange controls;
Different domestic policies: national governments have differing views as to the
aims of fiscal/monetary policy. This can result in varying levels of inflation between
trading partners, affecting their competitive positions;
Statistical data: the detailed tracking of all transactions between a country and
its trading partners means that statistics regarding international transactions tend
to be of a greater depth than those relating to domestic transactions;
Relative immobility of factors of production: It is far easier for production
factors to move around within the borders of a country than to move between
countries;
Created by Achievers Tutorial Centre (Pretoria Campus) - 078 628 2401
Marketing considerations: Companies cannot always apply the same marketing
techniques that have proven to be successful in one country to other international
markets. Different countries often have different demand patterns and market
requirements. These necessitate the formulation of sales techniques appropriate
to such. [Show Less]