4.1.2 International Trade and Business Growth

Question 1

Define specialisation

Answer 1

Concentrating on and becoming an expert in a particular area

Question 2

What are the benefits to India of specialisation?

Answer 2

• Increased productivity and output, means reduced average costs and economies of scale.
• More resources are devoted to the industry rather than being spread out, the scale of production can be increased to gain the EOS.
• This gives the Indian call service industry comparative advantage.
• Increased productivity will lead to GDP growth and increasing sales will boost economic growth.

Question 3

Downside of specialisation

Answer 3

• Country may become over reliant on one industry which is a risk.
• Other countries may become cheaper in the same industry and may be harder to compete.
• If the business grows too big it may suffer from DEOS through lack of communication and co-ordination.

Question 4

Define FDI

Answer 4

Foreign direct investment - means a business from one country decides to establish themselves in another country.

Question 5

Benefit of FDI

Answer 5

May decide to build factories or other business premises which will create jobs for the host nation