International Trade

Economics S.S.S 3 First Term

WEEK 9

International Trade

Performance Objectives

Student should be able to:

1. Explain how domestic trade differs from international trade.
2. Discuss comparative cost theory.
3. Explain the limitations of comparative cost theory.

Content

International trade also known as foreign trade or external trade is the exchange of goods and services between countries. Trading globally allows consumers and countries to be exposed to goods and services not available in their own countries, or which would be more expensive domestically. The importance of international trade was recognized early on by political economists like Adam Smith and David Ricardo.

According to David Ricardo, the country should specialize in the production of goods and services for which it has a cost…