Explain Intra Industry Trade Economics Essay
The basic definition of international trade is the exchange of items or commodities between countries without considering the nation boundary. The country is able to export a product when the product industry has grown completely and the production is far more than the demand of the home country. Import activity is done by purchasing certain product from other country to meet the demand of the nation about certain product. Economies of scale determine the import and export activity. Trading is the cause for organizations to focus on cost efficiency. Another point of view for organizations to think about trade is it expands the industry boundary without any limit. The industry can expand its business activity and the output to export. If an organization is producing a product in large quantity, there is a phenomenon that its cost will reduce and it is call economies of scale.
Example: if the fixed cost to produce product A is 5000/-, the variable cost is 4/ unit. The lesser the company will produce the higher will be the cost. And the higher the quantity is produced the fixed cost will be divided more on the large number of units produced.