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International Trade Simulation and Report - Assignment Example

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International Trade Simulation and Report

nding of the team’s debate surrounding international trade, the concept summary results of the assessment and the findings from the evaluation of the effect of government policy on economic behavior.  Finally, this paper will briefly describe the World Trade Organization (WTO), one trade topic indentified by the WTO, and what the team learned researching the WTO.
The Theory of Comparative Advantage. If two countries X and Y trade in two goods G and H, both can benefit by specialising in the good in which they have comparative advantage and then trading them. This has been proved valid even when country X has an absolute advantage in both goods due to the complexities of intra-country distribution of resources (Bumbu, 2008).
Distribution of Gains and Losses from Trade. If goods G and H use two inputs, K and L (capital/ labour), at given prices, production of goods will probably utilize inputs in different ratios. If G uses a higher ratio of K to L than H, production of that good becomes K-intensive, relative to H. Here, if G is K-intensive, it will mean that H is L-intensive. If country X’s inputs of production have a higher ratio of K to L than country Y, then X is K-abundant and Y is L-abundant, relatively (ibid).
A country will tend to export products which are intensive in factors that country has in abundance. A labour-abundant country (say country Y), will tend to export labour- intensive products. Also, country X’s capital intensive exports will rise. As it does so, the relative price of the abundant factor in that country will rise. The L-abundant country will see labour prices rising, i.e. wages will rise. Purchasing power of owners of labour will rise; purchasing power of owners of capital will fall (ibid).
Cesar: The simulation detailed the complex and often confusing economic theories of comparative and absolute advantage; open and closed economies; opportunity cost; regulatory trade restrictions, quotas and tariffs like anti-dumping ...Show more


Increase in international trade is de rigueur, given the onset of globalization with its fiercely contested challenges.  This paper will list one advantage and one…
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