| How can Trade impact Developing Nations? | -Developing Nations can Import Goods that their current Technology can not achieve. This leads to a Higher Standard of Living
-Trade gives these Nations access to New Materials and thus New Industries can be born. The Economies can be better Developed |
| How can Trade impact Developing Nations? | -Developing Nations can Import Goods that their current Technology can not achieve. This leads to a Higher Standard of Living
-Trade gives these Nations access to New Materials and thus New Industries can be born. The Economies can be better Developed |
| How can Trade impact Developing Nations? | -Developing Nations can Import Goods that their current Technology can not achieve. This leads to a Higher Standard of Living
-Trade gives these Nations access to New Materials and thus New Industries can be born. The Economies can be better Developed |
| What are the Advantages of Trade? | -Because Nations can not Produce all their Needs and Wants, as Resources are Unevenly Distributed, Trade sorts out the Exchanges between Goods and Services. This helps to sort out the economy
-Trading Globally allows Consumers to enjoy a Large Variety of Goods and Services, as well as Increasing Competition leads to More Efficient Markets and Better Standards of Living. It is something amazing
-Markets Abroad allows for greater Econ of Scale, as well as New Ideas and Skills can be brought to Developing Nations. |
| Why do Nations specialize in a certain Good or Service? | -They have the resources to make the Good or Service Efficiently
-Better at other Nations at making the Good or Service |
| What advantages comes from Specialisation? | -Costs are Lowered, meaning it can lower Prices for Consumers
-World's Resources used more efficiently
-Global Output is Increased as well as Living Standards |
| What are the Disadvantages to International Trade? | -Trading Internationally leads to Higher Transportation Costs
-Currency Exchanges when Trading in a Foreign Nation incurs Costs.
-Complying with other Nation's Legal and Technical Requirements, Legal Documents being translated, Advertising Legalities, Market research... Its a huge Cost
-More Trading leads to more Globalisation, which has its own Downsides |
| What are the Disadvantages of Specialisation? | -Domestic Industries may Shut Down as Foreign Firms are Better at Making the Goods or Services.
-Specialisation leads to Overreliance on 1 Industry, which in turn can lead to Economic Instability
-Nations are Vulnerable to Cuts in the Supply of Goods they do not Produce
-If a Nation Focuses on 1 Industry, then all the other Industries may start Declining leading to Mass Structural Unemployment due to a lack of Transferrable Skills |
| What does an Absolute Advantage mean? | -When the Output of a Product is Greater per unit of Resource used. |
| In a Scenario where Country A has an Absolute Advantage in Chocolate, and County B has an Absolute Advantage in Chips, how could both these Nations get the Maximum Output | -If Countries A and B have their Goods they have an Absolute Advantage, then they should shift their Production, and Specialise in that Good.
-The Outcome would be that Total Output would Rise, as its Resources are being used in the Most Efficient way. |
| What does Comparative Advantage mean? | -Refers to when the Opportunity Cost of Producing a Good is Lower than the Opportunity Cost for Other Nations |
| What are the Assumptions of Comparative Advantage? | -No Economies or Diseconomies of Scale
-No Transportation Costs or Barriers to Trade
-Perfect Knowledge exists
-Factors of Production are Ignored
-Externalities are Ignored |
| What does a Nation's Term of Trade mean? | -This refers to the Relative Price of its Exports compared to its Imports
-The Formula, in terms of Index Numbers are:
Term of Trade Index = Index of Average Price of Exports / Index of Average Price of Imports x 100 |
| Say that Portugal's Exports of Wine, in Index Numbers, increased from 102 to 120, and that Portugal's Imports did not Rise at all. What happens to Portugal's term of trade index? | -Because Exports have risen, its Term of Trade Index would be more Higher and thus Better off
-Portugal would be able to Afford more Imports |
| How can Trade impact Developed Nations | -Imports are Very Important to Maintain High Living Standards
-Products are usually Cheaper when bought Abroad, as Increased Competition and Cheaper Labour |
| How can Trade impact Developing Nations? | -Developing Nations can Import Goods that their current Technology can not achieve. This leads to a Higher Standard of Living
-Trade gives these Nations access to New Materials and thus New Industries can be born. The Economies can be better Developed |
