4.1.2- Specialisation And Trade

Question 1

Why do economies trade?

Answer 1

-global trade is projected to grow
-booming demand for digitally delivered services
-increased access to different goods+services
-can access cheaper prices
-initial resource endowment
-some economies are better at producing certain G+S
-economies can earn greater incomes
-better use of scarce resources
-greater political stability
-avoid internal economic shocks

Question 2

What is absolute advantage?

Answer 2

When a country can produce a good more cheaply in absolute terms than another country

Question 3

Who is David Ricardo?

Answer 3

A free market economist

Question 4

What are David ricardo’s assumptions?

Answer 4

-no transport costs
-2 economies
-2 products
-all products are homogenous
-FOP are perfectly mobile
- no protectionist trade barriers
-perfect knowledge exists

Question 5

What is comparative advantage?

Answer 5

When a country is able to produce a good more cheaply relative to other goods produced