How does external trade help in stabilising the prices of essential goods in developing country?

Dear Student, 
The answer given by Robin is correct. As we know that, external trade refers to trade between countries. In external trade, produced goods of a country cross the boundaries and are sold in another country. There is also incoming of goods produced from foreign countries entering our country. Therefore, if prices of a goods increases due to shortage of goods in domestic market, then developing countries can import (purchase) goods from other countries and therefore, prevent prices from rising. Similarly, ‚Äčif prices of a falls in due to excess supply of goods in domestic market, then developing countries can export (sell) the surplus to other countries and therefore, prevent prices from falling in the domestic market. Therefore, we say that external trade helps in stablising prices inthe developing countries. 

  • 5

if price of any commodity tend to increase due to short supply, the country can import such godds to conrol price

similarly, if price of any commodity tend to decrease due to increased supply , the country can control the price decrease through importing excess supply of goods

thus , external trade can be used as an instrument for stabilizing price

  • 2
What are you looking for?