globalisation Flashcards
Which 2 Asian countries have become leading economies thanks to globalisation?
India and China.
How has the UK’s economy changed since the emergence of globalisation?
It has shifted from producing goods to offering services.
What is free trade?
Occurs when countries trade with no protectionist measures such as tariffs, quotas and red tape.
Why have developing countries gained an advantage in the production of manufactured goods?
These countries have fewer regulations and lower labour costs, meaning it is cheaper to produce goods there, hence lower prices.
Define absolute advantage
This is when country A can produce more units of output than country B with the same factor inputs.
Define comparative advantage
This is when country A can produce the same units of output than country B but with a lower opportunity cost.
List a few advantages of specialisation
- Greater world output
- Higher standard of living for developing countries
- Increased supply of goods to choose from
List a few advantages of free trade
- Greater economic growth
- Greater efficiency due to competitive markets
- Exploit economies of scale, which brings lower costs and therefore lower prices
What is Foreign Direct Investment?
This is the flow of capital from one country to another.
Why is FDI good for a developing economy?
It creates jobs and encourages investment in technology.
What is trade creation?
When a country consumes more imports from a low cost producer.
What happens to the countries that aren’t a member of a specific trading bloc?
They will face tariffs and other protectionist measures when trying to trade with members of a trading bloc.
How do tariffs affect imports?
They reduce imports, because the price of imports become more expensive due to the introduction of a tax.
What is a quota?
A limit on the quantity of imports allowed into a country.
How do quotas affect consumer surplus?
They reduce consumer surplus, because the price of these imports increase given a restriction on their output.
