Inteational Trade

Question 1

Benefits of international trade

Answer 1

Welfare gains and increase availability of goods

LEDcs access to goods they wouldn’t be able to get e.g capital and technology

MEDcs access to luxury goods and cheaper materials

Rising living standards

Eos for producers

Increase competition

Innovations and dynamic efficiency (creative destruction)

Source of ecnomic growth

Question 2

Costs of international trade

Answer 2

Individuals and industries may be made worse off (structural unemployment) for MEDcs and LEDcs

Negative externalities and depletion of natural resources (poor agricultural practice)

Countries more vunreble to exchange rate flinctuations

Can make countries reliant on other countries (e.g russian gas)

Question 3

What does a country do so they can produce at a low opportunity cost than another country ?

Answer 3

Exploits it comparative advantage

Question 4

Sources of comparative advantage

Answer 4

Climate e.g agricultures

Natural resources

Demographics and human capital

Capital and stock

Innovation

Institutional framework (e.g regulation )

Question 5

Climate e.g agriculture

Answer 5

Venuzuala absolute advantage in producing crude oil , they produce more so maximise utility

But susceptible to exchange rates