4.1.2 - International Trade and Business Growth

Question 1

What is imports explained

Answer 1

• The UK is only a small Island so we need to bring in goods from other countries that we might need. This is called importing.
• Some countries specialise in producing certain goods, and with their low labour costs they can make products at more attractive prices than we can in the UK

Question 2

What are exports explained

Answer 2

• All countries trade with other countries, they send products abroad. This process is called exporting.
• The UK exports:
• Medical supplies
• Cars
• Gas turbines
• And gold….

Question 3

What is specialisation

Answer 3

• Specialisation is the process of concentrating on and becoming expert in a particular subject or skill
• In terms of countries it means that a country will have industries in which it leads the world. This may be due to; proximity of raw materials, low labour costs, historical ability or other factors

Question 4

What are the benefits of specialisation

Answer 4

A. Increased productivity and output, this means reduced average costs and economies of scale
B. As more resources are devoted to the industry rather than being spread out the scale of production can be increased to gain the EOS
C. This gives the industry comparative advantage over the next best country
D. The increased productivity will lead to GDP growth and increasing sales will boost economic growth

Question 5

What are the downsides of specialisation

Answer 5

• A country may become over reliant on one industry (eggs in one basket) and this does not spread risk
• Other countries may become cheaper in the same industry and it may be harder to compete
• If the business grows too big it may suffer from DEOS through lack of communication and coordination

Question 6

What is FDI

Answer 6

• FDI is foreign direct investment – this means that a business from one country decides to establish themselves in another country.