International trade and business growth 4.1.2 Flashcards
What are imports?
Buying of goods and services from other countries.
What are exports?
Selling goods and services to other countries.
What are the factors affecting imports and exports?
- Exchange rates
- Price elasticity
- State of the world economy
Exchange rates:
Increase in UK exports= more demand for £ as foreign imports pay less.
Depreciation make exports cheaper so demand increase.
What is appreciation?
Increase in value of currency compared to another.
What is depreciation?
Decrease in value of one currency compared to another.
S.P.I.C.E.D
S trong
P ound
I mports
C heaper
E xports
D earer
W.P.I.D.E.C
W eak
P ound
I mports
D earer
E xports
C heaper
Price elasticity:
Import inelastic = import ££ increase
import elastic = import ££ decrease.
Short run - depreciation will make imports more expensive
long run - foreign replaced w domestic goods.
State of the world economy:
Strong economy will import to meet demand
imports raw mats which then exported
need to consider : productive capacity (more E) newly rich countries (changes in I&E) natural resources, exporters (China and increase in raw mats).
What is specialisation?
When economic units e.g people, businesses, countries concentrate on producing specific goods.
What is the importance of specialised workers?
- Increases productivity as better understanding of job role = division of Labour.
- Provides competitive advantage.
- Leads to economies of scale
How does a business gain efficiency?
- Better understanding of production requirements.
- Economic unit can specialise.
- Efficient time usage
- Technical economies of scale.
What is FDI?
Investment made by business from one country into assets in another country, normally adding to production capacity.
Horizontal vs Vertical FDI
Horizontal - duplication of facilities in countries
Vertical - stages of production process occur in other countries
businesses can operate geographically close - reduces transport costs
