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CLOTH We Fig. 2. We Pe Wi WI' WHEAT PI TET Botora Trades After Trado Change When Production Ow ow, WW, Cloth Production tx, CS: What export ww Cloth import Whalesumption ow OW. WW Cloth consumption OC, oc c.c. Emeland: Cloth Production OC, OC, CC Wheat Production ow, ow, ww, We export cc: Cloth import Wheat consumption OC CC, Cloth ontmpton ow. ow W, w Cos Lrom intcmational tradc arc clear from the fact that India now oblins more clutle for every unit of o surrendered than beban take the slope of TT is greater tuu II. Sularly. England now himment wheel Sa very unit of clothi surradered than before tmde; the stope of TT is less dan FF As long as each country is Stoconsuma along the line of international exchange rabo (TT) rather than its owuline of domestic exchange Rol for India and EF for England), both the condities will gain in welfare Summary of Gains from Ince mational Trade Various gains from international trade can be summariseed below: It encourages territorial dission of Labour or in alio.ial specialisation on crains of scale ac realised fruns expanded perkets Intatalionual specialisation and economies in production lead to increase in productivity, low costs ead cheaper prices Dan laternational trade increases tal came and consumption. This leads to expansion of cumployment and eitput and promotes economo prowth QUESTIONS 1. What do you understand by gains from international trade ? Illustrate gains from trade through suitable examples and diagrams 2. How can gains from trade be measured ? What factors affect the distribution of gains ? 1 How does gain from international trade arise ? How is it shared by trading countries? 4. What is meant by terms of trade ? How are they determined ? 5. What are terms of trade ? What are the factors inlluencing terms of trade? 4=