Because countries cannot produce all of the goods/services that it needs, they must
reduce the needs for imports
Specialize and trade on global scale
Eliminate consumption of scarce goods.
Increase domestic production costs
There are several reasons why countries specialize and trade on a global scale rather than simply reducing the needs for imports or eliminating consumption of scarce goods:
1. Comparative advantage: Each country has its own strengths and weaknesses in terms of resources, technology, and skills. By specializing in the production of goods/services in which they have a comparative advantage, countries can achieve higher levels of efficiency, productivity, and output. This allows them to trade their surplus production for goods/services that they are not able to produce efficiently themselves.
2. Resource allocation: Specialization enables countries to allocate their limited resources effectively. By focusing on producing certain goods/services more efficiently, countries can optimize the use of their resources and achieve higher productivity. This results in increased overall output and economic growth.
3. Economies of scale: Specialization and trade allow countries to benefit from economies of scale. When countries concentrate their resources in specific industries, they can achieve larger production volumes and reduce average costs per unit. This leads to improved competitiveness and lower prices for consumers.
4. Access to a wider variety of goods/services: By participating in global trade, countries can access a broader range of goods/services than they could produce domestically. This enables consumers to have a greater choice of products at competitive prices, leading to improved standards of living.
5. Market expansion: International trade provides an opportunity for businesses to expand their customer base beyond domestic markets. By accessing larger international markets, firms can increase their sales, revenues, and profitability. This promotes economic growth and development.
Therefore, instead of increasing domestic production costs or reducing imports, countries find it more advantageous to specialize and trade globally to maximize their economic potential, improve efficiency, and access a wide range of goods/services.