Question

Why does international trade make poor countries better off?

What are the important requirements to be a well-functioning market economy?

Answer 1

1)

In following ways, International trade make poor countries better off:

• These countries have access to developed technologies of developed countries.
• Goods are available at cheaper rate.
• Capital goods requirement can be met with international trade.
• Consumer or social welfare is maximized by avoiding dead weight loss.

2)

Market economy works based on the demand and supply forces:

• There should not be government intervention in economic activities.
• There should not be externalities positive or negative.
• Demand and supply must reflect true demand and supply prevailing in the market.
• Law and order must be maintained appropriately.