An economic theory that accounts for changes in the patterns of trade over time is known as:
A) Strategic trade theory
B) First-mover advantage theory
C) Product life cycle theory
D) Strategic trade policy

Question

Quizplus · Accepted Answer

The product life cycle theory explains changes in trade patterns over time as products move through different stages of their life cycle, from introduction to growth, maturity, and decline. This theory suggests that as products become mature and reach the decline stage, production tends to shift to lower-cost countries while newer and more innovative products are introduced by developed countries. Strategic trade theory, first-mover advantage theory, and strategic trade policy are not specific to changes in trade patterns over time. Product life cycle theory explains how the pattern of trade changes over time due to the evolution of products and technologies. It suggests that as a product matures and its production becomes more efficient, it tends to shift from being imported to being exported. As a result, the comparative advantage of countries in producing the product also changes over time. This theory explains why certain countries initially have a comparative advantage in producing new products, but lose that advantage as the product becomes more standardized and production becomes more efficient.

An Economic Theory That Accounts for Changes in the Patterns