International Economics

Question 1

Impacts of globalisation on countries

Answer 1

• Can cause trade imbalances in countries like China who mainly export.
• ## Wealth and income inequalities if the benefits and costs of globalisation are not spread evenly

Question 2

Impacts of globalisation on producers and consumers

Answer 2

• Economies of scale become larger due to specialisation
• Firms have new competition which encourages them to lower costs and become more efficient which lowers price of goods

Question 3

Impacts of globalisation on workers

Answer 3

• Can take advantage of job opportunities across the globe
• Structural unemployment might occur as production is cheaper abroad so companies change location and leave workers behind

Question 4

Difference between absolute and comparative advantage

Answer 4

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.
Comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another country, they lose less using the same resources

Question 5

State some advantages of specialisation

Answer 5

• Greater world output, so there is a gain in economic welfare
• There could potentially be higher quality, since production focusses on what people and businesses are best at
• Consumers have a greater variety of goods and services to choose from

Question 6

State some disadvantages of specialisation

Answer 6

• Less developed countries might use up their non-renewable resources too quickly, so they might run out
• 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