Trade Stimulation
Rodamia’s economy relies on three main areas: agriculture, industries, and its services. In which Rodamia’s neighbors produce similar, but yet different products. Rodamia is the largest country compared to its neighbors. Four percent of its GDP comes from agriculture which is corn, wheat, cotton and dairy. Thirty percent from industry and sixty six percent services. There are three surrounding countries that border Rodamia. The three surrounding countries are: Suntize, Alfazia and Uthania which all produce their own resources.
Suntize is well known to have an industry infrastructure. Alfazia is better known for their agriculture, Uthania combines both the agriculture and industry within their economy. Each of the cities makes trades amongst each other. When you trade internationally you exchange goods and services with other countries. International trade leads to greater benefits for the country. Consumers get more of a choice when it comes to price and quality. Domestic producers are then able to expand their markets to others. This makes the economy more vibrant and way wealthier.
You have countries that specialize in agriculture using Alfazia for example; they have fertile soil and great climate which is exceptional for agricultural products.
Some countries have certain resources that you cannot get anywhere else, this makes it easy to ensure everyone’s needs and wants are met by trading internationally. When making trades internationally you must make sure all the rules and agreements have been met. There are particular groups that monitor international trade. When countries get ready to make trades they have the option to actually trade or not. They are also able to decide if they want to impose trade barriers or use free trade.
Trade barriers are restrictions placed on trade by the government. Tariffs are commonly known as a trade barrier. Free trade does not include restrictions such as tariffs and quotas. Countries like to modify their wealth by using the resources they are able to use so they can boost their economy.
When Rodamia begins to trade internationally this gives the country greater benefits than before they made the trade internationally. Domestic producers can expand into other countries which gives Rodamia more of an investment. Absolute advantage is the ability to produce a good at a lower cost, in terms of real resources, than another country.
Comparative advantage is the ability to produce a good at a lower cost, relative to other goods compared to other countries. When you look at the theory of comparative advantage, you should specialize in the production and the only export items at a lower cost than other countries. There are countries that can produce multiple resources which lead to a comparative advantage in producing goods. The increase demand that producers in the concerned countries face lead to an increase in production, achievement of economies of scale