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3. Theories of International Trade > 3.5 Country Similarity Theory

3.5 COUNTRY SIMILARITY THEORY

Different from the classical argument or the factor proportions theory, Linder (1961) did not emphasise on the supply side or the cost of production. He rather stressed on the demand side meaning that trade is dependent upon the preference of the consumers. The pattern of consumption depends upon the level of income. And so, the consumers in the developed countries demand for sophisticated goods in contrast with the consumers in the less developed countries that demand for less sophisticated goods. Whenever an entrepreneur manufactures a particular commodity, it designs the product keeping in view the taste of the domestic consumers. It is because that the meeting of demand of the domestic consumers is the primary concern. The manufacturer....


  

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