No, not the effect on your waistline of having all your food delivered to your couch. And not the extra stuff you can buy since you started selling your hemp bracelets on Etsy.
The home market effect is an economic hypothesis that predicts that countries which have a large internal market for a product will also become a large exporter. The large home market combines with economies of scale and network effects to make it advantageous to concentrate production in these nations.
People in Sardinania love sardines. They eat sardines for every meal. Sardine omlettes for breakfast. Sardine sandwiches for lunch. Sardine tartar for dinner. Sardine cake for desert.
Because of the strong home market, Sardinania becomes a major exporter of sardines as well. Since they're making all those sardines anyway, they might as well make some extra for the foreign market.
The Home Market Effect provides an alternative model of foreign trade, as compared to ones rooted in the concept of competitive advantage.
Related or Semi-related Video
Econ: What is an Open v. Closed Economy?2 Views
And finance Allah shmoop What is an open versus a
closed economy Well to answer the question let's take a
little trip This is the Isle of Four Sick and
Seclusion It's way out in the ocean far from any
other country and not along any particular trade route No
ships ever come by No planes ever land The natives
subsist mostly on homegrown coconuts and specially farmed Algy Well
they've never seen a Marvel movie Sadly not even Ultron
They have never tasted Dairy Queen and it's a very
lonely very sad highland There's no trade it all with
the outside world no exports no imports to say it
another way It's a closed economy Alright moving elsewhere in
the world we come to the United States of America
It's the centre of global commerce the global economic network
It trades with other countries all the time Imports and
exports are well both Hi It's an open economy Well
don't think of opening closed Economy is like a light
switch right Like lights off completely closed lights on completely
open Instead the ideas have opened and closed Described a
continuum more closed versus Mohr Open every country fall somewhere
on that spectrum The U S is relatively open but
there are closed aspects of our economy We put tariffs
on certain products We have import restrictions We have rules
about exporting things like high end military technology or data
about our high school students looking atyou Their Facebook international
banking rules also make friction an important export of capital
Well meanwhile even the most closed economies in the real
world don't get all the way to the Isle of
Forsaken seclusion situation Even economies that are considered relatively close
like say North Korea they're not completely closed They have
some trade They might import weapons from China for instance
or export tweeted threats to South Korea You could argue
that Earth as a whole is a closed economy After
all We have yet to set up any trade routes
with Martians at least not yet Keep watching the skies
though People work trying But even the idea of the
Earth as a closed economy has some holes in it
Things like the gold and uranium we mind were probably
deposited by meaty yours Meanwhile we import energy and light
from the sun and we export radio signals An old
space junk somewhere in the cosmos there might be a
giant space crab using a Voyager probe as its shell
And it's probably only a matter of time before we
start receiving signals from some space monster version of Netflix
emanating from the Vega system You know way out there
Can't wait to see how their reboot of House of
cards turns out to Some closed economies are ones that
lack outside foreign trade They can become self sufficient But
it can also mean significant scarcity If the forlorn islanders
suffer a bad algae harvest well they can't just import
food Suddenly from another country It can lead to rationing
or a mass starvation Open economies include a lot of
foreign trade high levels of imports high levels of exports
In the real world no economy is ever completely open
or completely closed And outside of the Isle of Forsaken
seclusion it's hard for an economy to be completely closed
ever Instead everything falls on the spectrum somewhere between more
open and more clothes Economies like North Korea are skewed
toward the close side Economies like the U S Air
skewed toward the open side And as for those forsaken
islanders Well give them a little time the global markets
bound to find him Eventually they'll be selling their algae
products to hipster vegans through Amazon and delivering high protein
forsaken coconuts via drone having crew prepare for take off
