international trade Flashcards
what is international trade?
exchange of capital, goods, and services between countries
-represents significant share of gross domestic product
why is there international trade?
when countries do not have the resources, or capacity to satisfy their own population’s demands
- efficiency
- product differentiation
- consumer choice
- technological change
- market deregulation
what is free trade?
a country is able to freely trade goods and services with another country without any tariffs, quotas or custom duties
what is comparative advantage?
every country is better at making some goods than they are at making others
-countries will specialise
what are the benefits of free trade?
economies of scale increased consumer choice increases competition encourages innovation minimises domestic monopoly power trade encourages political stability
what are the disadvantages of free trade?
poorer nations are exploited
wealthy nations hold monopoly power and significant influence over host countries
what is protectionism?
effort to restrict trade with other countries through tariffs, quotas and custom duties
-protects domestic industries, saves local jobs and protects economy
what is a tariff?
used to restrict imports by increasing price of goods and services purchased from overseas
-gives advantage to locally produced goods
what is a tariff?
used to restrict imports by increasing price of goods and services purchased from overseas
-gives advantage to locally produced goods
what are quotas?
limit on the quantity of a particular product that can be produced, exported or imported
-protect domestic suppliers, but higher prices for consumers
what are trading blocs?
set of countries in a specific geographic region enter into international trade together, often brought through a free trade agreement
what are the pros of free trade?
free trade between countries will encourage specilisation
increased levels of trade
high cost domestic producers
protection from cheaper imports
what are the cons of free trade?
unable to promote free trade with other nations
trade blocs distort trade patterns
risks rival blocs
inability to trade with more efficient producers
what is a single market?
a geographical area without any internal borders or other regulatory obstacles to the free movement of goods and services
-best example is EU
what impact will leaving EU have on UK businesses?
extensive market research
protectionist policies to protect British jobs
UK risk retaliatory tariffs and quotas
less choice for consumers
