Patterns of Trade

• What factors influence the pattern of trade?

  • Comparative advantage
  • Impact of emerging economies
  • Changes in exchange rates
  • Growth of trading blocs and trading agreements
• How does comparative advantage influence the pattern of trade?

  • As a strategy to profit maximise
  • Countries choose what and how much to produce based on the profit they can make off of it
• How do emerging economies influence the pattern of trade?

  Emerging economies begin to gain higher market share of the global businesses which makes other countries lose as trading relationships change
• How do trading agreements influence the pattern of trade?

  • Creates trade creation (when production of goods are shifted from a high-cost country to a low-cost country)
  • Creates trade diversion (when a trading bloc causes production of a good from a country with low opportunity cost to one with a high opportunity cost)
• How do exchange rates influence the pattern of trade?

  Goods become cheaper or more expensive due to appreciation or depreciation