Question

What is intra-industry trade?

Short answer

In short intra-industry trade is the exchange of similar products belonging to the same industry.

Step-by-step solution

Step 1. Meaning of intra-industry trade.

It refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade, where the same types of goods or services are both imported and exported.

Step 2. Examples of this kind of trade.

It includes automobiles, foodstuffs and beverages, computers and minerals.

Step 3. Types of intra-industry trade.

Three types of intra-industry trade:-

a) Trade in homogenous goods.

b) Trade in horizontally differentiated goods.

c) Trade in vertically differentiated goods.

Step 4. Economic benefit of participating in intra-industry trade.

It include the division of labor that leads to learning, innovation and unique skills, economies of scale that leads to increased output and average lower costs, and customer benefits include more variety and lower prices.