6.1 International Specialization Flashcards
What is specialisation in economics?
Specialisation is when a nation focuses on producing a limited range of goods or services that it is highly efficient at and has an advantage in.
Give an example of international specialisation.
Middle Eastern countries specialise in petroleum due to their vast oil and gas reserves.
What are the two main bases for determining specialisation?
Resource allocation and cost of production.
What is absolute advantage?
When a country can produce more of a good or service with the same resources
Give an example of absolute advantage.
India has an absolute advantage in call centres due to its cheap and abundant labour force.
What is comparative advantage?
When a country can produce a good at a lower opportunity cost compared to another country.
Give an example of comparative advantage.
Philippines has a comparative advantage in call centres
Are you required to know the terms absolute and comparative advantage for the exam?
No
What is an advantage of specialisation in terms of efficiency?
It leads to economies of scale and increased output while reducing costs.
How does specialisation create jobs?
Higher output encourages investment
How does specialisation promote international trade?
Countries produce efficiently and trade for goods they lack
How does specialisation increase government revenue?
Through higher incomes and increased trade
How does specialisation benefit firms in global markets?
It gives access to international markets
What is consumer sovereignty in the context of specialisation?
Consumers worldwide gain access to cheap and high-quality goods from specialised producers.
Give examples of goods associated with consumer sovereignty due to specialisation.
Swiss chocolate
What is structural unemployment?
Job loss that happens when workers in declining industries are displaced due to specialisation.
What is a resource-related disadvantage of specialisation?
It can lead to over-exploitation of natural resources like oil and coal.
What is the threat of foreign competition in specialisation?
Non-specialised domestic industries face intense competition from more efficient foreign producers.
What is the risk of over-specialisation?
Countries become highly dependent on specific exports
Give an example of over-specialisation affecting a country.
Oil-exporting countries lose revenue when prices fall and must diversify into industries like tourism.
What is strategic vulnerability in specialisation?
Relying on other countries for vital goods or services makes a country dependent and vulnerable to external changes.
