Question

Economics is a function of history, values, conflict and commerce. Give me three reasons why people and countries engage in trade (be succinct and on point)

Answer 1

Countries trade with each other because they don't have the money or the ability to fulfill their own needs and desires on their own. Countries can produce a surplus by developing and exploiting their scarce domestic resources, and trade that for the resources they require.

There are several reasons why goods and services are likely to be imported from abroad. Imports can be less expensive, or of better quality. They can also be easier to get or simply more appealing than goods produced locally. There are no local alternatives in many instances and importing is essential.

Advantageous trade can take place between countries if the countries differ in their ability to produce goods and services. Technology refers to the techniques used to turn resources into outputs (labour, money, land).
Advantageous trade can take place between countries if the countries differ in their resource endowments. Resource endowments refer to the skills and abilities of a country's workforce, the natural resources available within its borders (minerals, agricultural land, etc.), and the sophistication of its capital stock (machinery, infrastructure, communications systems).

Advantageous trade may take place between countries when there are different demands or desires between countries. Individuals in various countries can have different expectations or demands with respect to different goods. The Chinese will probably demand more rice than the Americans, even if they face the same price. Canadians that demand more beer, more wooden shoes from the Netherlands, and more fish from the Japanese than would the Americans, even though both faced the same prices.