Question

identify and explain the basis for trade, world price, small country

what happens when a country is an exporter or importer of goods

Answer 1

Basis for trade are the resources of one's country. A country imports those goods which are available for lesser price because either :-

1. Its production is too difficult in that country.

Or

2. Its production is too costly in that country.

It is based on the theory of comparative advantage.

Basis of world price is the utility of that good. Higher the utility,higher the world price.

If the country is exporter of goods, it earns money through exporting and gain foreign currency. It exports those goods which are easily produced in that country. Whereas, a country spends its currency and import goods.