International Trade Simulation and Report
Kimberly Castillo, Tanya Bell, Elijah B. Gowdy, Derrick Brown
June 6, 2012
Instructor, John Holmberg
One Advantage and One Limitation of International Trade
Advantage and limitation of International Trade, Countries have different quantities, qualities, and cost for resources such as land, labor, capital, and entrepreneurship (University of Phoenix, 2009). International trade is the import and export of these resources between countries. International trade allows countries to distribute their resources more efficiently. Importing and exporting of resources is vital to the economy.
A gain from ...view middle of the document...
Costs can be created through taxes, price ceilings, and price floors. The fourth key point team b recognized within the simulation was a term called tariff. A tariff is basically a tax given on imported goods. It increases the cost to those imported goods.
Absolute and Comparative Advantage
In the simulation there were also two terms that were discussed about called absolute and comparative advantage. According to the site Investopedia absolute advantage is “The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.” This gives a country an opportunity to lower costs and increase profits. When one can lower cost of production and increase profits one clearly gains an absolute advantage. On the site Investopedia it also states that comparative advantage is “A situation in which a country, individual, company or region can produce a good at a lower opportunity cost than a competitor.” This means that a product can be produced cheaper and faster by a country, compared to another country that produces the same product.
Influence Affecting Foreign Exchange Rates
The major influences affecting the foreign exchange rates are the debt or lack of debt in the given country. If the country has a debt or a surplus this will determine how strong his or her currency is, and the rate is also determined by the supply and demand for the country’s currency. Supply and demand is influenced by the economy, foreign trade, and international investors.
Many factors influence the level of interest rate; these factors are trading activity, financial and trade political stability, and economic fundamentals. (Berko, 2006-2012).
• Below Team B discussed, and were in agreement with the following issues:
A. International Trade
B. Concept Summary Results For The Assessment
C. The Effects of government Policy on Economic Behavior
There are several debates involving international trade. Two of the main issues involve globalization and protectionism. Globalization is the process of countries becoming open to the idea of foreign investment and trade. Supporters of globalization believe that free trade negatively affects the cultures of other countries. Imports of clothing, music and other goods to developing countries from developed high-income countries often replace local products and are integrated into their lifestyle. Globalization also allows multinational business and firms to move factories and businesses from high-income countries to low income countries. These companies generally pay their employees lower wages than they would in their own country, and often don’t meet safety regulations. Also, these companies sometimes make the use of child labor, which is illegal in the U.S. and some other countries.
The other issue is protectionism. Protectionism is when the use of trade barriers shield domestic firms from foreign...