The theory of international trade is guided by the principle of comparative cost. This principle was propounded by David Richards.

The principle of comparative cost states that a country should specialize in the production of goods and services in which they have a greater comparative advantage or the least comparative disadvantage.

Below is an instance on the principle of comparative cost.

Now, let us assume we have two countries producing and exporting rice and beans respectively.

• On a daily basis, If country A produces 100 grams of rice and 300 grams of beans daily and country B produces 50 grams of rice and 150 grams of beans, then according to this principle, country A has an advantage over country B with regards rice and beans production; but better still, country A has a greater comparative advantage in the production of beans.

 

From the above instance, it can also be said that country B is at a disadvantage with regards to the production of rice and beans. Infact, it has a bigger comparative disadvantage with regards to beans production.

The point to note here is this: A country utilizing the principle of comparative cost will always produce quality goods and services at a cheaper cost.

No single country manufactures all the goods and services in our world. This implies that every country of the world relies on certain goods and services imported (or brought in) from other countries.

Foreign trade is defined as the exchange of goods, services and capital between two or more countries.

Foreign trade is also termed as international trade.

Please read more on foreign trade here

Division of labour can be defined as the act of splitting job process into a number of different processes such that each process is done by a different person or group of persons.

Through the process of division of labour, one worker may constantly perform a specific aspect of the job and as a result, may become specialized in that area.

The result of specialization in the different department of a job will imply the production of goods with better quality.

Please read on division of labour here

Forms of division of labour relates the various ways through which division of labour may be carried out.

Take for instance, within a country, one state may choose to specialize in the production of a cars while another specializes in a different area, let's say agriculture.

Below are the forms of division of labour

• Complex division of labour

• Occupational division of labour

• Geographical division of labour

 

Please read more on the forms of division of labour here.

Balance of Trade can be defined as the total value of goods imported and exported by a country during a specific period; usually yearly or annually.

Balance of trade can be either positive, negative or zero

• A positive balance of trade implies that a country exports more goods than its imports. China as a country is likely to have a positive balance of trade since it exports a variety of goods to other countries.

• A negative balance of trade is often considered as an unfavorable balance of trade since the country's importation exceeds its exportation. Nigeria (as at 2018) is likely to have a negative balance of trade.

• A zero balance of trade is reached when imports equal exports.

Please read on balance of trade and balance of payments here.

Balance of Payments is defined as a record showing the relationship between a country’s total payment made to other countries and the total money received from other countries within a time period.

The balance of payments is a guide that tells a country whether it has enough savings to pay for all its imports. It will also show the economic output of a country.

• Needs are things considered necessary for an individual or a group of persons. Personally, they may be referred to your required goods and services. Your needs are necessary and you consider them very important for your well-being. Examples are food, clothes and shelter.

• Wants are always desired. They are not necessarily required and you can absolutely do without them. Examples of wants are expensive cars and watches.

According to Parkinson and Bates, Production is defined as an organized activity of transforming resources into finished products in the form of goods and services.

From the above definition, the objective of production is therefore to satisfy the demand for goods and services.

It is worthy of note to state that whenever services are rendered, such rendered services are also considered as production. This is true because the rendered services satisfy the needs or wants of the recipient or consumer.

Therefore, people who provide services like hairdressers, security men and public bus drivers are considered productive; and whatever service had been rendered can appropriately be referred to as production.

Please read more on production here.

A prepayment is somewhat an opposition to deferred payment. This is true because the concept of prepayment oversees that the buyer makes payment beforehand and must wait to enjoy whatever had been paid for after some significant time had elapse.

In short, you can think of a prepayment as 'paying in advance'. An example is when a tenant pays in advance to a landlord for an apartment yet to be used. Another example is an online payment for items yet to be received.

Deferred payment is defined as a future payment eventually made after a buyer receives goods and services without an initial payment. Think of it as the: 'buy now, pay later' type of transaction.

From the perspective of the seller, the money yet to be received after the supply of goods or services is called an accrued revenue, unrealized revenue or accrued assets.

According to the buyer, the money yet to be paid after the delivery of goods or services is called an accrued expense. For instance, a company that owes employees salary can be said to have an accrued expense.

Please read more on deferred payment here

For an item to be considered a commodity, it must satisfy three conditions. These are:

1. It must be standardized. In the case of agricultural commodities, they must be in their unprocessed state.

2. It must be usable upon delivery

3. The price of a commodity item must vary.

A commodity market can therefore be defined a place where people buy and sell homogenous goods in large quantities.

Homogeneous goods are products that essentially have the same physical characteristics (or qualities) as similar products from other brands.

It is noteworthy to state that foreign currencies, data and bandwidth have all been included as part of today's commodity markets. In this regard, a commodity market will always have it's own set of rules and regulations.

Please read more n commodity market here

Marketing is a broad field of study. Below are branches or divisions of marketing:

• Advertising

• Search Engine Optimization (SEO)

• Merchandising

• Branding

• Promotions

• Copywriting

• Social Media Optimization (SMO)

• Event planning

• Customer Relationship Management (CRM)

• Graphic Design

• Internet Marketing

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