Meaning of New Trade Theory New Trade Theory (NTT) is an influential framework in international economics developed in the late 1970s by economist Paul Krugman, who later won the Nobel Prize in Economics for his work in this field. This theory provides an innovative explanation for global trade patterns, diverging from traditional models like Comparative … Read more
Theories of International Trade International trade theories are the base for a person, firm, and nation to understand how international trade or businesses work. They help to understand how is the international market, what factors hinder companies from success, and how a company will make its share in the international market. Behavior and motivation of … Read more
Meaning of Competitive Advantage Theory Porter’s competitive advantage is an international trade theory that explains why a nation achieves success in the international market (trade, business, and competition) and why others do not. This theory is also known as Porter’s international trade theory, Porter’s diamond model, and national competitive advantage. In 1990, Prof. Michael Porter of Harvard … Read more
Meaning of IPLC Theory Prof. Raymond Vernon developed the International Product Life Cycle (IPLC) theory in 1966. He explained how a product produced in the home country gets international market and starts exporting and ultimately how the international market forces the home country to start importing. According to Vernon, demand for new innovative products grows both … Read more
Overview of Heckscher-Ohlin’s Factor Endowment Theory Heckscher-Ohlin’s Factor Endowment Theory also called Heckscher-Ohlin Model, H-O Model, Factor Endowment Theory, and Factor Proportion Theory is an economics and international trade theory that states that a nation should produce and export products for which factors of production the country is rich. Factor endowment refers to the richness, … Read more
Meaning of Comparative Cost Advantage Comparative cost advantage can be defined as the advantage a nation gets in the production of goods and services comparatively high whether the production of both products has an absolute advantage or absolute disadvantage. In 1817, Prof. David Ricardo further pushed the absolute cost advantage theory of Adam Smith with his book … Read more
What is Absolute Cost Advantage? Absolute cost advantage can be defined as the ability of the nation to produce more products with lower costs and resources more efficiently than the other nation. Absolute advantage is achieved when a nation can produce more goods than another nation with the same amount of input. It is Adam … Read more
Difference Between Macroeconomics and Microeconomics Microeconomics and Macroeconomics differ as follows: Nature of the Study of Economic Units Microeconomics studies the individual or small economic variables of the economy such as individual consumers’ savings, investment, and income. Whereas, macroeconomics deals with wholes like national income, full employment, price level, etc. The objective of the Study The main … Read more