4.1 A2 Business key terms Flashcards
economic growth
increase in a country’s productive capacity
emerging economies
economies of developing countries where there is rapid growth, but also significant risk
human development index (HDI)
collection/mix of statistics that includes: 1) life expectancy 2) standard of living (GDP per capita) 3) literacy rate
ranking countries according to their human development
literacy rate
percentage of adults (over the age of 15) that can read and write
purchasing power parity (PPP)
a measure that uses the price of purchasing a standardised basket of goods and services in order to compare prices across economies
gives a more realistic comparison of GDP
gross domestic product (GDP)
the total value of output (goods and services) produced in a particular time period
used to measure economic activity
gross domestic product (GDP) per capita
total value of output (goods and services) produced in a given time period (year) divided by the number of people in the population
comparative advantage
the theory that a country should specialise in products and services that it can produce more efficiently than other countries
e.g. (coffee from Brazil or tea from China)
competitive advantage
an advantage a business has over its competitors gained by specialisation (research, product development, management) - or by offering consumers greater value - either by lowering prices or providing benefits, services and quality that justifies the high prices
devision of labour
when production is broken down into many separate tasks, and each task is done by specialised workers
by each worker focusing on a particular operation, this leads to an increase in output
imports
foreign goods and services bought byresidents of a country
apples from Mexico purchased by UK consumers in a UK based supermarket
exports
goods and services produced in one countryand purchased by residents of another country
(Chinese steel sent to the UK by Chinese companies)
foreign direct investment
an investment made by a firm or individual in one country into business interests located in another country
FDI takes place when an investor establishes foreign business operations (factories) or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company (global mergers)
international trade
exporting (selling abroad) and importing (buying from abroad)
specialisation
when each individual employee focuses on a given task
leading to an increase in output
import tariffs
taxes that are imposed on imports - increasing the cost of traded goods
it is a form of protectionism
globalisation
growing integration and interdependence of the world’s economies
transnational or multinational companies
TNCs) / (MNCs
companies that own or control production or services facilities outside the country they are based in
note: it’s more about having business operations and activities in more than one country rather than selling goods
world trade organisation (WTO)
an international organisation that promotes free trade by persuading countries to abolish protectionism barriers (e.g. tariffs, embargoes, import quotas etc)
it polices free trade agreements, settles trade disputes between governments and organises trade negotiations
administrative barriers
rules and regulations that make it difficult for importers to penetrate an overseas market
dumping
when a firm in one country exports a product to another country at a price below the price it charges in its home market or below the costs of supply
embargo
a complete ban on international trade
usually for political reasons
import quota
a physical limit on the quantity of imports allowed in a country
infant industries
new industries that have yet to establish themselves
protectionism
any attempt by a government, trade bloc or region to impose restrictions on the import of goods and services and protect domestic producers
subsidy
financial support from government given to a domestic producer to help compete with overseas firms
these include: - grants
- interest free loans
- tax breaks
this leads to a decrease in costs, increase in supply
trade barriers
inclusion of all costs present when getting a good to the final consumer - excluding production costs
- transport costs
- import tariffs
common market
a market where goods, labour and capital can move freely across the member states; trade barriers usually eliminated - or at least reduced
customs union
a union where member states remove all trade barriers between themselves and members adopt a common set of barriers against non members
economic union
a type of trade bloc involving both a customs union and a common market
monetary union
an economic union that uses a common currency
trading bloc
a group of countries that have signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves
free trade area (FTA)
a region where member states remove all trade barriers between themselves, but each member state keeps different barriers against non members
- NAFTA (North American Free Trade Area) is an example
preferential trading area (PTA)
a type of trading bloc where certain type of products from participating countries receive a reduced import tariff rate
regional trade agreement (RTA)
agreement made between two or more countries within a geographical region, which is designed to facilitate trade by bringing down barriers
rules of origin
a system of allocating certificates whereby a defined amount of a product or service must be certified as being created within that region
single market
a market where almost all trade barriers between members have been removed and common laws or policies aim to make the movement of goods and services, labour and capital between the members easy
