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International Business

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Unit 2 Individual Project

International Business

Due to level of globalization or the economic interdependence of nations increasing, countries today are becoming more integrated. This integration has increased due to trading internationally.

Trade can be simply defined as the exchange of goods and services and is relative to world output which can be defined as the value of products and services produced by countries. ( When world output grows, trade also grows because more products for trade are produced. Relatively, when the world output declines, there is also as significant decline on trade.

When world output grows, trade also grows due to the products being traded are produced. On the other hand when world output declines, so does trade. In the past few decades there has been an increasing integration of the world economy through the rise of international trade. World output has increased between 1980 - 2002. ( This increase is due to traded goods becoming cheaper over time relative to goods that aren't traded at all.

In tougher times such as recessions, or during natural disasters, people will not purchase as many products as they would if their finances were stable. A country's currency may also be affected and its value decreased, making international trading more expensive. Present day levels of trade are increasing, which are brought about by the falling cost of trade which includes transportation, communication, and tariffs; productivity growth in tradable goods sector; and rising income per head because as a country's income rises, the consumer tends to shift their spending away from basics to more diversified products involved in international trade.

International trade is the exchange of products, services, and money across national borders; essentially trade between countries. The pattern of international trade is determined by the characteristics of global demand and supply as well as government policies. Global demand is basically what is produced and how it is produced and is influenced by the increasing consciousness by consumers of the social, environmental and health effects. Global demand influences the production structures and the choice of technologies and has implications for the social and environmental effects of production. On the other hand, global supply depends on the competitive advantage of firms and the comparative advantage of countries facing the global demand.

Trade is classified as inter-industry and the intra-industry. Inter-industry trade occurs between countries with different product specialization while intra-industry trade is between countries that produce the same product. For example, USA and Japan both manufacture automobiles but at the same time they both purchase automobiles from each other. Because of these types of trade especially in the intra-industry trade, differentiation



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