Question

What are “gains from trade”? What is the primary benefit of trade? Why is the idea that trade is beneficial counterintuitive?

Answer 1

Gains from trade are benefits which economic agents receive if they are allowed to voluntarily trade with one another. It is also the gain in consumer and producer surplus from liberal trade policies.

Primary benefits of trade are-

1.Large variety of goods available to select from.

2.Efficient utilization and allocation of resources.

3.Efficient production

4.increases employment.

5.Goods are available at cheaper prices.

Disadvantages of trade-

1.Domestic producer's are subjected to extreme foreign competition.

2.Dumping

3.Dependence on the importingcountry(sometimes even for basic commodities like rice,wheat).