They only need refinements and extensions to incorporate modern realities.A major limitation of the classical theory was its use of labour theory of value.The period after the Second World War witnessed a rapid transformation both within individual economies and in their mutual economic relations.
This deficiency was removed by Haberler in restating the classical theory in terms of “opportunity costs”.
This concept measures the cost of producing one item in terms of foregoing production of some other item.
In addition to various tips, conceptual diagrams on basic economics concepts are also included in the book to give an overall insight into each subject topic.
This book is suitable for students taking Paper 2 and Paper 4 of the Cambridge International AS & A Level Economics (9708).
The theory developed further to incorporate the fact that countries do not possess identical quantities and varieties of productive resources.
International Economics Essay
Also, production technologies vary as between products and, with an expansion in international trade, can undergo further changes.
In addition, it recognizes the role of fiscal and monetary policies pursued by individual countries.
Attention has also been paid to the role of multinational corporations, cartels, monetary unions, customs unions, economic unions, trade blocs, and so on, as also to the questions of non-price competition, technology flows, the role of foreign direct investment, and similar other phenomena.
The subject of international economics originated from a simple theory of international trade which was formulated for answering a few basic questions and which, by now, has acquired a high degree of sophistication and complexity, making use of several analytical tools.
Moreover, right through the history of its evolution, there has been a continuous interaction between historical facts and theoretical models of international economics.