With reference to new theories of trade, account for the increased Essay

With reference to new theories of trade, account for the increased importance in the last fifty years of intra-industry trade as a component of world trade - Essay Example Theories have been developed to explain the increasing intra-industry trade, including technology based theories, new trade theories and the national competitive advantage. This is the case of decreasing cost of production in an industry in a given country. With the presence of a large population in the country that consumes a given product in the country, the demand for the product locally increases. This forms the large local market for the given product. Consumer preference for a product is mostly influenced by the consumer taste for the product as well as the cultural practice of the given country. With culture, there is a continued demand for the product generation after generation since the culture is passed over from one generation to the next; therefore ensuring a large market for the product locally. As such, the cost of production for the product decreases with increase in demand. This is due to the economies of large scale production that ensures decrease in total cost with increased production especially in manufacturing. With the large local market, the country benefits from economies of scale in production of the particular product. This gives the country a cost advantage in production of the given product, thus leading to price advantage. Pricing the product lower than other countries will see other countries prefer to import the given product than producing it. With culture, there is spread of the market globally from travelling of the people to other countries, thus the need to export the product to other countries. Enhanced transport has seen people travel far and wide to different countries. Consumer taste and preference goes a long way influencing imports in different countries. Creation of free trade will improve on imports in the country to cater for the varying consumer preference (Donnan 2013, p.3). Though there is a locally produced product, visitors in other countries may prefer the same product from their country of origin