Edexcel A Economics - Theme 4 Flashcards
What is globalisation?
The ever increasing integration of the world’s local, regional and
national economies into a single, international market.
What are the characteristics of globalisation?
Free trade of goods are services
Free movement of capital and labour
Free interchange of technology and intellectual capital.
Increased FDI
Global branding and increased inter dependency..
What factors have continue to globalisation?
Trade in goods
Trade in services
Trade liberalisation
Multinational Corporation (MNCs)
International financial flows
Communications and IT
Containerisation
How has the trade in goods contributed to globalisation?
Developing countries have capital and knowledge to manufacture goods.
MNCs take advantage of cheaper labour abroad.
How has the trade in services contributed to globalisation?
Trade in tourism, call centres and software production had increased from developing countries to developed countries.
How has the trade liberalisation contributed to globalisation?
Growing strength and influence of WTO advocates free trade which has reduced trade barriers.
How has MNCs contributed to globalisation?
MNCs are organisations which own or control the production of goods and
services in multiple countries.
Marketing has become global and by growing this take advantage of economies of scale.
Spread of technological knowledge and EoS has led to lower costs of production.
How has international financial flows contributed to globalisation?
The flow of capital and FDI across international borders has increased.
There has been more
investment in factories abroad.
How has communications and IT contributed to globalisation?
The spread of IT has resulted in it becoming easier and cheaper to
communicate, which has led to the world being more interconnected.
Better transport links and easier transfer of information.
How has containersation contributed to globalisation?
Cheaper to ship goods across the world.
Prices fall, more competitive markets.
Helps meet world demand.. Economies of scale and less labour needed.
However, mainly MNCs which exploit this and can lead to structural unemployment.
What is the impact of globalisation on individual countries?
Trade imbalances.
Inequalities in consumers and countries access to health, education and markets.
Income and wealth inequalities.
Weakened culture due to global brands. However, helped spread culture and helped improve quality of life.
What is the impact of globalisation on governments?
Lose sovereignty due to increase in international treaties.
What is the impact of globalisation on producers and consumers?
Consumers and producers can earn the benefits of specialisation and economies of
scale as firms become larger.
Firms operate in a more competitive environment.
Producers lower average costs by switching to cheaper labour.
Increase world GDP, increases living standards and help lift people out of poverty.
Rise in average consumer incomes.
Some consumers gain more from globalisation than others. Globally, there are fewer people in extreme poverty, but this has not been the case in Sub-Saharan Africa.
Consumers could take advantage of a wider range of goods and services because of the increased availability of goods and services.
What is the impact of globalisation on workers?
Workers can take advantage of job opportunities across the globe.
Structural unemployment.
Production shifts labour to other countries.
Countries would have had the change from
agriculture to manufacturing to services anyway, and globalisation simply sped it up.
When production shifts to lower labour cost countries, the creation of jobs could be
seen as either beneficial or harmful.
On one hand, MNCs could be exploiting their
labour and providing poor working conditions in. On the other hand, working in a sweatshop might provide a higher, more stable income
than any alternatives
What is the impact of globalisation on the envirnment?
Increased consumer living standards might lead to
more pollution through increased production and increased car use.
Consumers might show more concern towards the environment as their average incomes
increase.
What is comparative advantage?
Comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another country.
This means they have to give up producing less of another good than another country, using the same resources.
What is absolute advantage?
A country has absolute advantage in the production of a good or service if it can produce it
using fewer resources and at a lower cost than another country.
What are the assumptions and limitations of comparative advantage?
Assumes a perfectly competitive market.
Does not consider exchange rates.
Countries can develop an advantage in production.
Comparative advantage is a model that only uses 2 countries.
What are the advantages of specialisation and trade in an
international context?
Greater world output, so there is a gain in economic welfare.
There could potentially be higher quality, since production focuses on what people and businesses are best at.
A greater variety of goods and services
Lower average costs, more competitive.
There is an increased supply of goods to choose from.
There is an outward shift in the PPF curve.
More opportunities for economies of scale
What are the disadvantages of specialisation and trade in an
international context?
Less developed countries might use up their non-renewable resources too
quickly, so they might run out.
Countries could become over-dependent on the export of one commodity,
There could be more structural unemployment, since production moves
abroad.
Some countries might become stuck in the production of one good or service, so they cannot develop further.
What are the factors affecting patterns of trade?
Comparative advantage
Impact of emerging economies
Growth of trading blocks
Changes in relative exchange rates.
What is terms of trade?
The terms of trade measures the volume of imports an economy can receive per unit of exports.
How is terms of trade calculated?
(Index of export prices / index of import prices) x 100
What factors affect a countries terms of trade?
Globalisation price of invisibles (services) is less impacted than
visibles (manufactured goods).
Price elasticity of demand. The more inelastic the demand for
exports than imports, the better the terms of trade, as the country can charge higher prices for exports.
Only imports manufactured goods and only exports primary goods, the terms of trade will be worse.
An appreciation in exchange rate lead to improvement in the terms of trade, as it increases price of exports and a decrease in the price of imports.
Protectionist measure, the terms of trade will improve because imports are restricted.