4.1.3 - Pattern of trade Flashcards
What are the four factors affecting patterns of trade ?
- comparative advantage.
- impact of emerging economies
- growth of trading blocs and bilateral trading agreements
- changes in relative exchange rates
Application - Comparative advantage
Application - Impact of emerging economies
.
Application - Changes in relative exchange rates
Application - Change in protectionism and trade barriers
How does comparative affect patterns of trade
Definition: Comparative advantage is an economic principle that suggests countries should specialize in the production of goods and services in which they have a lower opportunity cost compared to other countries.
-Specialisation → Increased Efficiency → Trade Patterns Emerge → Global Trade Flow → Dynamic Comparative Advantage
Name the 5 emerging economies
- Brazil
- Russia
- India
- China
- South Africa
How does emerging economies affect patterns of trade
- Industrial Growth → Expansion in industries like electronics and pharmaceuticals.
- Specialisation → Focus on goods with comparative advantage at lower costs.
- Trade Flow Shifts → Emerging economies become major exporters and Developed countries import more due to competitive pricing.
- New Demand → Rising incomes in emerging markets drive imports of luxury goods.
- Global Integration → Improved trade infrastructure boosts connectivity.
How does trading blocs and bilateral trading agreements affect patterns of trade
- Elimination of Barriers → Tariff reductions boost intra-bloc trade.
- Increased Trade Volumes → Lower costs encourage higher trade.
- Trade Diversion → Preference for bloc members over non-members.
- Economic Integration → Cross-border supply chains develop.
- Impact on Non-Members → Reduced competitiveness outside the bloc.
How does changes in relative exchange rates affect patterns of trade
Use :
SPICED
&
WPIDEC
