Trade Flashcards
(13 cards)
What are mutually beneficial terms of trade?
The two countries need to find a mutually beneficial terms of trade – in other words, a trade of good X for good Y that benefits both countries.
If they trade at 3:2 then both countries can benefit because
3:2 or 1.5X:1Y lies between the internal opportunity cost ratio for both countries.
What are some comparative advantages? (underlying assumptions)
• No transport costs
• No barriers to trade
• Homogenous goods
• No economies of scale
• No environmental costs
• Perfect knowledge
• Factor mobility between uses
• All resources fully employed and all goods and services sold
- Many of these assumptions do not hold in the real world, so the gains from trade may be less or more than the theory predicts
What is a comparative advantage?
When a country/business has access to technology or innovations that allow cheaper and/or more efficient production of goods.
This gives a cost advantage and, therefore, a price/quality advantage over competitors.
- It is a more appropriate trade and
specialisation concept when considering highly differentiated manufacturing goods, for example.
What is International Specialisation?
Where countries/regions focus on producing & exporting specific goods or services in which they have a comparative advantage, while importing other goods or services that they can acquire more efficiently from trading partners.
What is Absolute Advantage?
A country produces a good at a lower direct costs
i.e. if a country using the same factors of production can produce more of a product
What is Competitive Advantage?
When your country/business has access to technology or innovations that allow cheaper and/or more efficient production of goods.
What is the Pattern Of Trade?
The mix of goods and services that a country and imports and exports in international trade; the range of countries it exports to and imports from
What is the Geographic Pattern of Trade?
How businesses and consumers in other countries trade with businesses and consumers in a country
What is Intra-Regional Trade?
Trade between countries in the same region
What is the Gravity Theory of trade?
Countries tend to trade most with other nations in closest proximity
What is the Commodity Pattern of Trade?
The type of products (goods and services) traded internationally.
• It shows if a country has a dependence on primary, manufactured, service exports.
• As a nation develops complexity and capabilities, they become capable of supplying and exporting a broader range of products
What is Primary Product Dependency?
Where a country’s economy heavily relies on the export of raw materials or primary products, such as agricultural goods, minerals, or energy resources.
What is an Emerging Market?
An economy that cannot yet be classified as ‘developed’
and is investing heavily in its productive capacity.
