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a country that engages in international trade will find that it increases the demand for the...

a country that engages in international trade will find that it increases the demand for the factors (of production) used by the exporting industries and decreases the demand for the factors used in the import-competing industries. Is this true or false?

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Answer #1


Yes, it is true

When a country opens its doors to international trade, it will find some industries exporting their goods and experiencing an increase in their demand; while some industries compete with imported products.

This means, while demand and production of exporting countries will increase; the demand for import competing domestic countries will fall as they will face tough foreign competition and their market share will decrease and thus the consumer base they cater to will also decrease.

This means with increase in production of exporting industries, demand for factors of production used by these countries will increase.

On the same lines, a fall in the production of import competing companies will lead to a fall in factors of production used in import competing industries.

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