Question

Define and expain intra-industry trade. Discuss the elements that contribute to intra-industry trade.

Answer 1

Intra industry trade is the exchange of goods and services belonging to the same industry . For example. Import and export of petroleum products between countries. It is most commonly applied to international trade.

Intra industry teade is considered to be more beneficial than inter-industry trade. This is necause such trade stimulates innovation and exploits economies of scale.

According to the economist Paul Krugman, intra industry trade allows economies to specialise to take advantage of increasing returns i.e. economies of scale and to get benefits of technological advacements in one country via trickle down economics.