UGC NET
UGC NET COACHING
UGC NET PREVIOUS PAPERS
UGC NET ADULT EDUCATION PREVIOUS YEAR PAPERS UGC NET PHYSICAL EDUCATION PREVIOUS YEAR PAPERS UGC NET RESEARCH APTITUDE PREVIOUS YEAR PAPERS UGC NET POLITICAL SCIENCE PREVIOUS YEAR PAPERS UGC NET PHILOSOPHY PREVIOUS YEAR PAPERS UGC NET LAW PREVIOUS YEAR PAPERS UGC NET MASS COMMUNICATION AND JOURNALISM PREVIOUS PAPERS UGC NET SANSKRIT TRADITIONAL SUBJECTS PREVIOUS YEAR PAPERS UGC NET PHYSICAL EDUCATION PREVIOUS YEAR PAPERS PAPERS UGC NET ISLAMIC STUDIES PREVIOUS YEAR PAPERS UGC NET INDIAN CULTURE PAPERS UGC NET REGIONAL LANGUAGE LITERATURE PREVIOUS YEAR PAPERS UGC NET FOLK LITERATURE PREVIOUS YEAR PAPERS UGC NET COMPARATIVE LITERATURE PREVIOUS YEAR PAPERS UGC NET PERFORMING ART PREVIOUS YEAR PAPERS UGC NET ARCHAEOLOGY PREVIOUS YEAR PAPERS UGC NET CRIMINOLOGY PREVIOUS YEAR PAPERS UGC NET GEOGRAPHY PREVIOUS YEAR PAPERS UGC NET ENVIRONMENTAL SCIENCES PREVIOUS YEAR PAPERS UGC NET WOMEN STUDIES PREVIOUS YEAR PAPERS UGC NET VISUAL ART PREVIOUS YEAR PAPERS UGC NET KONKANI PREVIOUS YEAR PAPERS UGC NET MUSEOLOGY PREVIOUS YEAR PAPERS UGC NET SOCIAL MEDICINE PREVIOUS YEAR PAPERS UGC NET INTERNATIONAL STUDIES PREVIOUS YEAR PAPERS UGC NET PRAKRIT PREVIOUS YEAR PAPERS UGC NET FORENSIC PREVIOUS YEAR PAPERS UGC NET PALI PREVIOUS YEAR PAPERS UGC NET KASHMIRI PREVIOUS YEAR PAPERS UGC NET TOURISM ADMINISTRATION PREVIOUS YEAR PAPERS UGC NET YOGA PREVIOUS YEAR PAPERS UGC NET ELECTRONIC SCIENCE PREVIOUS YEAR PAPERS UGC NET COMPUTER SCIENCE PREVIOUS YEAR PAPERS UGC NET HUMAN RIGHTS AND DUTIES PREVIOUS YEAR PAPERS UGC NET ECONOMICS PAPERS
UGC NET MOCK TEST
UGC NET SYLLABUS
UGC NET PAPER 1 SYLLABUS UGC NET ECONOMICS SYLLABUS UGC NET POLITICAL SCIENCE SYLLABUS UGC NET PHILOSOPHY SYLLABUS UGC NET PSYCHOLOGY SYLLABUS UGC NET SOCIOLOGY SYLLABUS UGC NET ANTHROPOLOGY SYLLABUS UGC NET COMMERCE SYLLABUS UGC NET ENGLISH SYLLABUS UGC NET POLITICAL SCIENCE SYLLABUS UGC NET MANAGEMENT SYLLABUS UGC NET HISTORY SYLLABUS UGC NET HINDI SYLLABUS UGC NET LAW SYLLABUS UGC NET GEOGRAPHY SYLLABUS UGC NET HOME SCIENCE SYLLABUS UGC NET SANSKRIT SYLLABUS UGC NET YOGA SYLLABUS UGC NET EDUCATION SYLLABUS UGC NET SOCIAL WORK SYLLABUS UGC NET ENVIRONMENTAL SCIENCES SYLLABUS UGC NET ELECTRONIC SCIENCE SYLLABUS UGC NET BENGALI SYLLABUS UGC NET PHYSICAL EDUCATION SYLLABUS UGC NET DEFENCE AND STRATEGIC STUDIES SYLLABUS UGC NET PUBLIC ADMINISTRATION SYLLABUS UGC NET MASS COMMUNICATION SYLLABUS UGC NET VISUAL ART SYLLABUS UGC NET FORENSIC SCIENCE SYLLABUS UGC NET URDU SYLLABUS UGC NET PUNJABI SYLLABUS UGC NET COMPUTER SCIENCE SYLLABUS UGC NET TELUGU SYLLABUS UGC NET POPULATION STUDIES SYLLABUS UGC NET MUSIC SYLLABUS UGC NET ARABIC SYLLABUS UGC NET MARATHI SYLLABUS UGC NET SOCIAL MEDICINE COMMUNITY HEALTH SYLLABUS UGC NET TAMIL SYLLABUS UGC NET TOURISM ADMINISTRATION SYLLABUS UGC NET GUJARATI SYLLABUS UGC NET INDIAN CULTURE SYLLABUS UGC NET ARCHAEOLOGY SYLLABUS UGC NET CRIMINOLOGY SYLLABUS UGC NET LINGUISTICS SYLLABUS UGC NET LIBRARY SCIENCE SYLLABUS UGC NET WOMEN STUDIES SYLLABUS UGC NET MAITHILI SYLLABUS UGC NET ORIYA SYLLABUS UGC NET CHINESE SYLLABUS UGC NET DOGRI SYLLABUS UGC NET NEPALI SYLLABUS UGC NET MANIPURI SYLLABUS UGC NET ASSAMESE SYLLABUS UGC NET FRENCH SYLLABUS UGC NET HUMAN RIGHTS AND DUTIES SYLLABUS UGC NET RAJASTHANI SYLLABUS UGC NET RUSSIAN SYLLABUS UGC NET SPANISH SYLLABUS UGC NET GERMAN SYLLABUS UGC NET JAPANESE SYLLABUS UGC NET ADULT EDUCATION SYLLABUS UGC NET BUDDHIST JAINA GANDHIAN AND PEACE STUDIES SYLLABUS UGC NET PERFORMING ART SYLLABUS UGC NET MUSEOLOGY SYLLABUS UGC NET TRIBAL AND REGIONAL LANGUAGE SYLLABUS UGC NET FOLK LITERATURE SYLLABUS UGC NET COMPARATIVE STUDY SYLLABUS UGC NET PERSIAN SYLLABUS UGC NET PALI SYLLABUS UGC NET KASHMIRI SYLLABUS UGC NET COMPARATIVE LITERATURE SYLLABUS UGC NET SANSKRIT TRADITIONAL SUBJECTS SYLLABUS UGC NET KONKANI SYLLABUS UGC NET INTERNATIONAL AND AREA STUDIES SYLLABUS UGC NET PRAKRIT SYLLABUS UGC NET BODO SYLLABUS UGC NET SINDHI SYLLABUS UGC NET ISLAMIC STUDIES SYLLABUS
UGC NET Notes
UGC NET Paper 1 Notes
UGC NET History Notes
UGC NET Commerce Notes
UGC NET Management Notes UGC NET Computer Notes UGC NET English Notes UGC NET Education Notes UGC NET Mass Communication Notes UGC NET Economics Notes UGC NET Electronic Science Notes UGC NET Environmental Science Notes UGC NET Law Notes UGC NET Political Science Notes UGC NET Psychology Notes UGC NET Sociology Notes UGC NET Geography Notes UGC NET Human Resource And Management Notes UGC NET Labour Welfare Notes UGC NET Teaching Aptitude Notes UGC NET Library Science Notes UGC NET Sanskrit Notes UGC NET Tourism Administration And Management Notes
UGC NET BOOKS
UGC NET PAPER 1 BOOKS UGC NET COMMERCE BOOKS UGC NET ENGLISH BOOKS UGC NET MANAGEMENT BOOKS UGC NET PAPER 2 BOOKS UGC NET ENVIRONMENTAL SCIENCE BOOKS UGC NET HISTORY BOOKS UGC NET POLITICAL SCIENCE BOOKS UGC NET EDUCATION BOOKS UGC NET ECONOMICS BOOKS UGC NET PSYCHOLOGY BOOKS UGC NET LAW BOOKS UGC NET SOCIOLOGY BOOKS UGC NET URDU BOOKS UGC NET PHYSICAL EDUCATION BOOKS UGC NET PHILOSOPHY BOOKS UGC NET COMPUTER SCIENCE BOOKS UGC NET GEOGRAPHY BOOKS UGC NET HOME SCIENCE BOOKS UGC NET ELECTRONIC SCIENCE BOOKS UGC NET SANSKRIT BOOKS UGC NET SOCIAL WORK BOOKS UGC NET MALAYALAM BOOKS UGC NET YOGA BOOKS UGC NET KANNADA BOOKS UGC NET MASS COMMUNICATION BOOKS UGC NET ODIA BOOKS UGC NET BENGALI BOOKS UGC NET POPULATION STUDIES BOOKS UGC NET ARCHAEOLOGY BOOKS UGC NET FRENCH BOOKS UGC NET MARATHI BOOKS UGC NET PUNJABI BOOKS UGC NET INDIAN CULTURE BOOKS UGC NET TOURISM ADMINISTRATION AND MANAGEMENT BOOKS UGC NET ANTHROPOLOGY BOOKS UGC NET TEACHING APTITUDE BOOKS UGC NET MUSIC BOOKS UGC NET LINGUISTICS BOOKS UGC NET LIBRARY SCIENCE BOOKS UGC NET PERFORMING ART BOOKS UGC NET FORENSIC SCIENCE BOOKS
UGC NET TIPS
UGC NET CITY-WISE COACHING

Theories of International Trade- UGC NET Commerce Notes & Material

Last Updated on May 14, 2025
Download As PDF
IMPORTANT LINKS

The theories of absolute advantage, comparative advantage and factor endowments provide the classical foundations for apprehending why international trade occurs. The newer trade theories offer extra insights into the tough facts of trade in today's globalized thrift. Together, they stress how global trade allows nations to maximize welfare economics by specializing in what they can make best. The basic theories of global trade are- the theory of absolute advantage, the theory of comparative advantage, the Hecksher-Ohlin theory, new trade theories, etc.

The theory of international trade is one topic which queries are surely asked in the UGC-NET Commerce Examination.

In this topic, the learners will be able to learn about the following topics:

  • What is the Theory of International Trade?
  • Explanation of Theories of International Trade
  • Factor Endowment Theory of International Trade
  • Haberler Theory of International Trade

What is the Theory of International Trade?

International trade is when countries buy and sell goods and services to each other. Countries do this because they have different resources like food, energy, or technology. Trade helps countries get things they don’t have or can’t make easily. There are different theories that explain why countries trade with each other. One theory is called ’Absolute Advantage’, where a country is better at making a certain good than others. Another theory is ‘Comparative Advantage’, which says countries should focus on what they do best, even if they aren’t the best at everything. ‘Heckscher-Ohlin Theory’, explains that countries will export goods based on their resources, like land or labor. According to the ‘Product Life Cycle Theory’, countries first make a new product and later start importing it when it becomes common. These theories help us understand how trade benefits countries in different ways. By following these ideas, countries can make the most out of what they produce and get what they need.

📚 Exclusive Free UGC NET Created by Our Experts
Subjects PDF Link
Download Free UGC NET Paper 1 Important Qs Important PDF Created by UGC NET Experts Download Link
Grab the Free UGC NET Commerce Important Qs used by UGC NET Students Download Link
Download Free UGC NET Political Science Important Qs Created by UGC NET Experts Download Link
Exclusive Free History Important Questions crafted by top mentors Download Link
Exclusive Free Geography Important Questions crafted by top mentors Download PDF
Download Free UGC NET Education Important Qs Created by UGC NET Experts Download PDF
Exclusive Free Sociology Important Questions crafted by top mentors Download PDF
Download Free UGC NET English Important Qs Created by UGC NET Experts Download PDF
Exclusive Free Economics Important Questions crafted by top mentors Download PDF
Download Free UGC NET Home Science Important Qs Created by UGC NET Experts Download PDF
Exclusive Free Psychology Important Questions crafted by top mentors Download PDF

UGC NET/SET Course Online by SuperTeachers: Complete Study Material, Live Classes & More

Get UGC NET/SET SuperCoaching @ just

₹25999 ₹11083

Your Total Savings ₹14916
Explore SuperCoaching

Explanation of Theories of International Trade

International trade happens when countries exchange goods and services. Theories of international trade help us understand why countries trade with each other and how it benefits them.

Absolute Advantage

This theory says that some countries are better at making certain goods than others. If a country can produce something more efficiently, it should make that product and sell it to other countries. For example, if a country can grow a lot of wheat quickly, it can sell wheat to countries that don’t grow much. This way, both countries can get what they need. Absolute Advantage helps countries save time and resources. It also helps them get products at lower costs.

Comparative Advantage

This theory says countries should focus on making things they are best at, even if they aren’t the best at everything. If a country is good at making wheat but better at making rice, it should focus on rice. Even if another country is better at making everything, both countries can still benefit by trading. This way, both countries can get what they need at lower costs. It’s about doing what each country does best. By trading, both countries can have more goods than if they tried to do everything themselves.

Classical Theory of International Trade

The ‘Classical Theory of International Trade’, was formed by economists such as Adam Smith and David Ricardo. According to this theory, nations must specialize in the products they are better at producing. If a nation specializes in making some products, it can then exchange those products with other nations. Other nations can then provide the products each nation requires. This is referred to as ‘comparative advantage’. Through trade, nations are able to acquire more goods and services than they would if they produced everything themselves. The theory assumes that free trade makes nations richer. It also illustrates how trade is good for all nations, even if one nation is more powerful than the other.

Mercantilism Theory of International Trade

The ‘Mercantilism Theory’, is an older concept regarding international trade. It explains that a nation becomes powerful by gathering as much silver and gold as they can. As per this theory, nations should export more than import. In this manner, they get more money and store it within their nation. Mercantilists felt that trade must only occur if it adds to the wealth of the nation. They also believed that the government must regulate trade and guard domestic businesses. The theory viewed trade as a means by which nations can grow richer and stronger. It calls upon nations to develop a strong economy by exporting products.

Heckscher-Ohlin Theory of International Trade

This theory says countries will export goods that use their most available resources. For example, a country with lots of land will export things that grow in the ground, like crops. A country with lots of workers might export things that need a lot of labor to make, like clothes. The theory explains why some countries make certain products based on what they have most. It helps countries decide what to produce and trade. By doing this, countries can use their resources wisely.

Product Life Cycle Theory of International Trade

This theory explains how products change over time. When a new product is invented, the country that made it will produce and sell it first. Over time, other countries learn how to make it too, and the original country starts to import the product. This happens because the product becomes common and easier to make. As a product becomes old or less special, the original country stops making it and buys it from other countries. This shows how trade changes as products get older.

Factor Endowment Theory of International Trade

The Factor Endowment Theory, also known as the Heckscher-Ohlin Theory, is a model of international trade that was developed by two economists, Eli Heckscher and Bertil Ohlin, in the early 20th century. This theory suggests that countries should specialize in and export goods that require resources which are abundant and cheaply available, whereas they should import goods that require resources that are in short supply within their borders.

While the Factor Endowment Theory has been a significant contribution to the field of international trade, it has its limitations. For example, it doesn't account for economies of scale, assumes perfect competition, and overlooks the role of technology and innovation. Despite these caveats, the theory helps clarify why certain countries tend to specialize in and export certain types of goods.

Haberler Theory of International Trade

Gottfried Haberler, an accomplished Austrian-American economist, provided a notable contribution to the theory of international trade. He challenged some of the traditional viewpoints on the subject and introduced the Opportunity Cost Theory of International Trade.

The traditional trade theory, also known as the Labor Theory (Adam Smith and David Ricardo), suggests that labor is the only factor of production and it differs in efficiency across countries. This makes the labor theory quite impractical in reality as it only takes one factor (labor) into consideration.

Haberler critiqued this aspect and proposed the Opportunity Cost Theory. In this theoretical framework, Haberler stated that what truly matters in determining the production of goods for trade is not just the labor efficiency, but the alternative that must be forgone, also known as the opportunity cost.

Haberler's theory has been seen as one of the critical developments in international trade theory. It's broader and more versatile compared to the labor theory. It takes into account not only labor but also all the factors of production like land, labor, capital, etc. Furthermore, it can be applied to all goods and services, whether they are agricultural, manufactured, or services.

Conclusion

Theories on why nations trade have changed over time. Older theories focused on the costs of production and resources. Newer theories consider real things like economies of scale, consumer choices and trade barriers. Though theories have changed, the comparative advantage remains vital. Nations will trade when they can make something at a lower relative cost. The neoclassical theory mixes ideas from old and new theories. It says comparative advantage is key, but other factors also matter. Overall, theories give useful insights into what drives trade.

Theories of international trade is a vital topic per several competitive exams. It would help if you learned other similar topics with the Testbook App.

Major Takeaways for UGC NET Aspirants

  • Introduction to Theories of International Trade: International trade is when countries buy and sell goods and services to each other. Countries do this because they have different resources like food, energy, or technology.
  • Explanation of Theories of International Trade
    • Absolute Advantage: This theory says that some countries are better at making certain goods than others.
    • Comparative Advantage: This theory says countries should focus on making things they are best at, even if they aren’t the best at everything. 
    • Classical Theory of International Trade: The ‘Classical Theory of International Trade’, was formed by economists such as Adam Smith and David Ricardo. 
    • Mercantilism Theory of International Trade: The ‘Mercantilism Theory’, is an older concept regarding international trade. It explains that a nation becomes powerful by gathering as much silver and gold as they can.
    • Heckscher-Ohlin Theory: This theory says countries will export goods that use their most available resources.
    • Product Life Cycle Theory: This theory explains how products change over time. When a new product is invented, the country that made it will produce and sell it first. 
  • Factor Endowment Theory of International Trade: The Factor Endowment Theory, also known as the Heckscher-Ohlin Theory, is a model of international trade that was developed by two economists, Eli Heckscher and Bertil Ohlin, in the early 20th century.
  • Haberler Theory of International Trade:Gottfried Haberler, an accomplished Austrian-American economist, provided a notable contribution to the theory of international trade.
Theories of International Trade Previous Year Questions
  1. A difference in relative commodity prices between two nations can be based upon a difference in________.

Options. A. Factor Endowment

  1. Technology
  2. Tastes
  3. All of the above

Ans. A. Factor Endowment

More Articles for UGC NET Commerce Notes

Theories of International Trade FAQs

Adam Smith's theory that nations should export what they can make at the lowest absolute cost was first in 1776. David Ricardo's theory of comparative advantage came in 1817.

Theories like new trade theory, product life cycle theory and gravity model consider real things like economies of scale, product variations and distance among nations.

The idea that nations should trade when they can make something at a lower relative cost remains critical in old and new theories. Some theories also note other factors.

Old theories assume things like contest is perfect, there are no trade barriers, and factors of production do not move. New theories relax these beliefs.

Besides resources and technologies, new theories say economies of scale, product differences, client wants, trade barriers, institutions and mobility of resources also affect trade.

Report An Error