9. Exchange and specialization (Міжнародний обмін товарами та спеціалізація)

An economy exist because there are gains from exchange and from specialization. There are two kinds of gains.

First, if individuals are free to exchange goods and resources, they can give up those things they value relatively less in exchange for those things that they value relatively more.

Second, if individuals can freely exchange resources and goods, they can specialize in particular production activities. Generally, specialization leads to an increase in the productions of goods and services even if the resources that an economy has do not change.

Exchange and specialization are the bases of economic activity for any society, although there may be a number of different ways that societies can choose to organize so as to facilitate exchange and specialization.

Individuals are better-off when they have opportunities to trade. While well-being is not always measurable, some of the gains from exchange can be measured. This is important because it provides an incentive for individuals to facilitate the exchanges among other individuals.

Exchange induces individuals to specialize so as to minimize the costs of producing goods.

The gains from exchange and specialization need to be equally divided among those who trade and specialize. Indeed, as relative prices change, the division of the gains will also change.

Specialization implies dependence on others for the goods that one might have produced but for which one trades. Specialization and exchange link individuals together creating an economy.

10. Export & import (Експортування та імпортування)

Nations, individuals and business firms trade with one another because they expect to benefit from the transactions.

Imports are the commodities that are produced in a foreign economy, but consumed in a domestic one. But commodities, consumed by individuals in a foreign economy and produced in a domestic economy are called exports.

A country that exports more goods than it imports has a positive balance of trade or a trade surplus. The opposite is a negative balance of trade or a trade deficit. Trade in goods is sometimes called visible trade. Services such as banking, insurance and tourism are sometimes called invisible imports and exports. Adding invisibles to the balance of trade gives a country`s balance of payments.

There are main reasons for which a country may decide to import a certain good or service:

1. it simply does not exist in the country.

2. it does not exist at a specific level of quality.

3. it is cheaper abroad.

There is an incentive to purchase a foreign commodity if the world price of it is low.

There are main reasons for which a country may decide to export a certain good or service:

1. the country has been the first to introduce a new product that is demanded worldwide;

2. the country has a knowledge to produce better quality products that are recognised by foreign public.

3. competition may be less intense abroad.

4. the price at which the good can be sold abroad is larger than domestic prices.

Ukraine is a major producer of grain, sugar, meat and milk products.

Ukraine imports 90% of its oil and most of its natural gas.