Business and Management
Economic Development

Pacific State University

EC512 International Economic Development

Assignment # 9

By
Phattaranit Prabpai

Q1. The effects of international trade on a country’s development are often related to four basic economic concepts: efficiency growth, equity and stability Briefly explain what is meant by each of these concepts as it relates to the theory of international trade.
The whole economic basis for international trade rests on the fact that countries do differ in their resource endowments, their preferences and technologies, their scale economies, their economic and social institutions, and their capacities for growth and development. Developing countries are no exception to this rule. Some are very populous yet deficient in both natural resources and human skills, at least in large regions of the country. Others are sparsely populated yet endowed with abundant mineral and raw material resources. Still others are small and economically weak, having at present neither adequate human capital nor the material resources on which to base a sustained and largely self-sufficient strategy of economic and social development.
A statistical summary of recent LDC trade performance and patterns. There follows a simplified presentation of the basic neoclassical theory of international trade and its effect on efficiency, equity, stability, and growth. We then provide a critique of pure free-trade theories in the light of both historical experience and the contemporary realities of the world economy. Like free markets, free trade has many desirable theoretical features, not the least of which is the promotion of static economic efficiency and optimal resource allocation. But also like free markets and perfect competition, free trade exists more in theory than in practice and today’s developing nations have to function in