economic question?

Question

What are the major sources of gains from trade? Why is exchange important to a nation’s prosperity? How does trade influence the quantity of output that trading partners are able to produce? In a market economy, will there be a tendency for both resources and products to be supplied by low-cost producers? Why or why not? Does this matter? Explain.

Answer 1

Trade creates value. Suppose that you are on your way home, and recall that you are out of bread. There is a grocery store, a block out of your way; you go there, select a loaf, and pay for it. Has value been created? Obviously, it has: you wanted the bread more than the money, so you are better off; the storekeeper wanted the money more than the bread, so he is better off also. How much value was created? Hard to say, but if there was a sales tax involved, it would necessarily have been at least enough to pay the tax. This is a simple example of a general principle, which applies to aggregations of people as well as to individuals. And yes, there will be a tendency for low-cost producers to predominate, since people generally (but not always!) prefer to spend no more than they must.

Answer 2

1. gains capitals including goods, services for trade and more money, labor for developing countries.
2. anti-inflation and related affect on economic growth.
3. both increase quantities of goods and services.
4. in aggregate, the supply side decreases as demand's growth from the lower price until the market meets the equilibrium price. The lower cost producer with the same quality can gain more production as demand increases.