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Chapter 33: Q.24 (page 804)

Do consumers benefit from intra-industry trade

Short Answer

Expert verified

Yes

Step by step solution

01

Step 1. Introduction 

Intra-industry trade refers to the trade of similar types of products between different countries. A significant portion of international trade is composed of trade between advanced high-income countries. who trade similar products.

02

Step 2. Explanation 

Consumers are benefited from intra-industry trade as they get a greater variety of products. Intra-industry trade can help in product differentiation in the same industry. International competition is also likely to drive prices down.

For instance, if a country produces cars, without trade the variety of cars in the market would be limited. There would be very small degree of competition in the domestic market. But intra-industry trade would competition and variety in the market.

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Most popular questions from this chapter

What is intra-industry trade?

What is splitting up the value chain?

If trade increases world GDP by 1% per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint: To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lanka’s GDP.

What is intra-industry trade?

In World Trade Organization meetings, what do you think low-income countries lobby for?
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