Assignment on Economic in UK
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Added on 2021-04-16
Assignment on Economic in UK
Added on 2021-04-16
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Running Head: ECONOMIC ASSIGNMENT Economic AssignmentName of the StudentName of the UniversityAuthor note
ECONOMIC ASSIGNMENT 1Table of ContentsIntroduction......................................................................................................................................2Theory of Comparative advantage...................................................................................................2Trade Overview in United Kingdom...............................................................................................3Export and import partners of United Kingdom..............................................................................4Pattern of Trade in UK....................................................................................................................5Export profile of UK........................................................................................................................7Import Profile of UK.......................................................................................................................8Comparative advantage of UK........................................................................................................9Balance of trade.............................................................................................................................11Trade policy in UK........................................................................................................................12Conclusion.....................................................................................................................................13Reference list.................................................................................................................................14
ECONOMIC ASSIGNMENT 2Introduction In today’s globalized world, countries are interconnected by establishing trade relationwith each other. Countries export goods that it can produce efficiently and import goods thatinvolve high production cost or not supported by the countries abundant factor of production.Different trade theories have been developed to indicate the direction of trade. Three widely usedtrade theories are the theory of absolute advantage, theory of comparative advantage andHeckscher-Ohlin model of trade. The pioneering theory of trade is the model of absoluteadvantage. Absolute advantage is defined in terms of country’s efficiency in producing a good ina better way than others produce. The efficiency is determined in terms of absolute productioncost. Comparative advantage on the other hand defines relative efficiency in terms of opportunitycost of production. In the Heckscher-Ohlin model, specialization depends on the abundant factorof production. The paper discusses trade theory and trade policy of United Kingdom givingreference to Ricardian theory of comparative advantage. Theory of Comparative advantage In 1817, David Ricardo refined the fundamental trade theory of absolute advantagepossessed by Adam Smith. The theory developed by David Ricardo is known as the principle ofcomparative advantage. The theory states that trade would take place when ratio of opportunitycost differs between countries and each country specializes in goods in which it enjoys acomparative advantage. The Ricardian trade model includes technological difference betweennations. Ricardo suggests that every country benefits from trade resulting in a higher welfare forthe world as a whole (Levchenko and Zhang 2016). The problem with absolute cost advantage isthat often nations have absolute cost advantage over all goods. The direction of trade then needsto be determined by considering the opportunity cost of production. The country with a lower
ECONOMIC ASSIGNMENT 3opportunity cost export the particular goods while country faced with a higher opportunity costimport that good. It has been observed that when countries specialize based on their comparativeadvantages the resources are allocated efficiently benefitting the nations participating in trade. Trade Overview in United Kingdom United Kingdom ranks fifth in terms of international trade. The economy of UK is verymuch dependent on the international trade. This encourages small and medium sized enterprisesto participate in trade and enjoys significant benefits. The main imports of UK include metalssuch as copper, lead, zinc, hides and skins, ferrous metals and other raw materials. UK importsone third of its food. UK’s heavy reliance on imports reflects its comparative disadvantage inproducing these items (Salvatore 2014). The main import sectors of UK are machinery,Industrial supplies, consumer goods, Transportation, Food and fuels. The major export sectors inUK are financial services, Business services, Transport, and Travel. Table 1: Summary of total import and export in 2016UK's trade summary in 2016Export (million US $)4,11,463No of Products4501No of Partners230Import (million US $)636368No of Products4539No of Partners226(Source: wits.worldbank.org 2018)As per the statistics obtained in 2016, UK’s total export of goods and services wortharound 411463 US $ million. Total number of exported items are 4501. UK’s export market has
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