Dynamic Gains from Trade
- A-Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 1 Apr 2021
Economics assessment questions often ask students to analyse and evaluate the potential gains from trade. A key idea that you might want to include in your answers is that of “dynamic gains from trade” – we’ll explore this idea in this short revision video.
Dynamic gains from trade make a domestic economy more productive. Dynamic gains from trade, are those benefits which accelerate economic growth of participating countries.
Examples of dynamic gains from trade
- Knowledge diffusion between businesses and countries – the transfer of ideas and knowhow can improve a country’s capabilities via deeper specialisation
- Learning economies of scale – encourages best practice across borders
- Increased competition between suppliers – drives product differentiation & choice
- Increased market contestability incentivises local producers to improve their productivity which then increases long run aggregate supply