4.1.3 - Pattern of trade

Question 1

What even is patterns of trade ?

Answer 1

• When ever a exports and imports between countries increase or decrease we say “Therby changing the patters of trade between Country 1(US) and country 2 (India)”
  Or
  For an individual country if they have increased exports or imports say “thereby changing their patterns of trade”

Question 2

What are the four factors affecting patterns of trade ?

Answer 2

• comparative advantage.
• impact of emerging economies
• growth of trading blocs and bilateral trading agreements
• changes in relative exchange rates

Question 3

Application - Comparative advantage

Answer 3

Definition : An advantage that a country has because they can produce goods with a lower opportunity cost compared to another country. Countries should produce goods in which they have a comparative advantage In.
Impact on trade : Countries tend to export goods and services in which they have a comparative advantage, influencing trading patterns.

Question 4

Application - Impact of emerging economies

Answer 4

Question 5

Application - Changes in relative exchange rates

Answer 5

Question 6

Application - Change in protectionism and trade barriers

Answer 6

Question 7

How does comparative affect patterns of trade

Answer 7

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

Question 8

Name the 5 emerging economies

Answer 8

• Brazil
• Russia
• India
• China
• South Africa

Question 9

How does emerging economies affect patterns of trade

Answer 9

• 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.

Question 10

How does trading blocs and bilateral trading agreements affect patterns of trade

Answer 10

• 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.
• As a result there will be regional concentration of trade, shifting global trade patterns towards intra-bloc trade while potentially diverting trade away from more efficient non-member producers (trade diversion). influencing global trade patterns.

Question 11

How does changes in relative exchange rates affect patterns of trade

Answer 11

Use :
SPICED
&
WPIDEC

Question 12

Evaluation point for comparative advantage affecting patterns of trade.

Answer 12

Question 13

Evaluation point for trading blocs affecting patterns of trade.

Answer 13

Question 14

Evaluation point for exchange rates affecting patterns of trade.

Answer 14

If you talking about an appreciation eval can be something along the lines of :

• Depends on how important the export is (Price elasticity of demand)
• example : Despite Singapores currency appreciating against the US dollar in 2022 - Singapore’s total exports grew by 8.6%, with pharmaceutical exports surging by 10.9%. This is because pharmaceuticals are a necessity good with inelastic demand—consumers continue to purchase them even if prices rise.

Question 15

Evaluation point for emerging countries affecting patterns of trade.

Answer 15