Import - Balance of Trade

Balance of Trade

Balance of trade represents a difference in value for import and export for a country. A country has demand for an import when domestic quantity demanded exceeds domestic quantity supplied, or when the price of the good (or service) on the world market is less than the price on the domestic market.

The balance of trade, usually denoted, is the difference between the value of the goods (and services) a country exports and the value of the goods the country imports:

, or equivalently

A trade deficit occurs when imports are large relative to exports. Imports are impacted principally by a country's income and its productive resources. For example, the US imports oil from Canada even though the US has oil and Canada uses oil. However, consumers in the US are willing to pay more for the marginal barrel of oil than Canadian consumers are, because there is more oil demanded in the US than there is oil produced.

In macroeconomic theory, the value of imports can be modeled as a function of the domestic absorption and the real exchange rate . These are the two largest factors of imports and they both affect imports positively:

Read more about this topic:  Import

Famous quotes containing the words balance of, balance and/or trade:

    ““What I want is a strange conjunction with you—” he said quietly; “Mnot meeting and mingling;Myou are quite right:Mbut an equilibrium, a pure balance of two single beings:Mas the stars balance each other.””
    —D.H. (David Herbert)

    “Finding the perfect balance is getting harder and harder. We need to teach our children to be cautious without imparting fear, to learn right from wrong without being judgmental, to be assertive but not pushy, to stick to routines without sacrificing spontaneity, and to be determined but not stubborn.”
    —Fred G. Gosman (20th century)

    “With respect to a true culture and manhood, we are essentially provincial still, not metropolitan,—mere Jonathans. We are provincial, because we do not find at home our standards; because we do not worship truth, but the reflection of truth; because we are warped and narrowed by an exclusive devotion to trade and commerce and manufacturers and agriculture and the like, which are but means, and not the end.”
    —Henry David Thoreau (1817–1862)