ABSTRACT
This chapter deals with the relationship between international economics and general economic theory, the role of international trade in raising the standards of living of all countries of the world. Parallel to the division of economic theory into microeconomics and macroeconomics is the breakdown of international economics into two major branches, international trade theory and international monetary economics. Like microeconomics, the pure theory of trade can be divided into two main branches: one branch dealing with problems of positive economics and the other dealing with problems of welfare economics. Thus, the analysis of the effects of free trade on domestic consumption, production, commodity prices, factor rewards, and so on belongs to what might be called international positive economics. Microeconomics is the study of the behavior of individuals and well-defined groups of individuals in the society, such as households, firms, and industries. The chapter also presents an overview of the key concepts discussed in this book.
