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Criteria Of Measuring Gains

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Electronics
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Nov 20, 2020

What Are The Criteria Of Measuring Gains From International Trade?

1 answer

Jasmine G.
Not rated
Nov 20, 2020

Gains accrue to all the participating countries in international trade. The classical economists usually adopted the following alternative criteria of measuring the gain from trade accruing to an individual country: Reduction in the Cost of Production.
Enhancement of the Real Income.
The nature of Terms of Trade.
In short, an index of cost reduction or improvement in the marginal physical product of labour can be used as a criterion for measuring the gain from international trade.
Thus, the gain from trade may be measured as under: G = Ca - Cb
Where,
G stands for the gain;
Ca stands for per unit cost of production after trade;
Cb stands for per unit cost of production before trade.
If G is negative, it suggests cost economy to that extent.

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