International trade and globalisation

Question 1

what is globalisation?

Answer 1

globalisation is the development of an increasingly global economy, characterised by increases in trade of goods and services, international flows of capital, and labour mobility

Question 2

what is the theory of comparative advantage?

in terms of opp cost

Answer 2

A country is said to have CA in the production of a good if it can produces it at a relatively lower opportunity than the other countries.

Question 3

why should countries specialise?

Answer 3

According to the theory of CA, in a 2 country setting - both countries should specialize in the production of G&S that they have a comparative advantage in so that world output of the goods increase and both countries will benefit from trade in consuming more of both goods.

Question 4

what is a trait of CA?

Answer 4

Comparative Advantage is dynamic -> it can change over time. What a country can be good at now can be lost eventually and new CA can be gained.

Question 5

what are the factors that can change CA?

Answer 5

1. The quantity and quality of FOP available
   E.g. Labour -> SG in the 1970s was a electronics manufacturing hub (radios, TVs) but as its economy grew, wages increase and it loses its CA in production to other SEA and Asia countries that offer cheaper labour
   - Natural Resources: Fossil Fuels
2. State of infrastructure -> Transport and ICT for connectivity
3. Level of Technology -> Determines the types of product and services a country produces

Question 6

what are the factors driving globalisation?

Answer 6

1. technological innovation and improvement in infrastructure -> decrease cost/increase speed of transportation and telecommunication
2. government policies -> FTA
3. firms increase access to international markets

end point : increase flow of G&S, labour and FDI

Question 7

what are the patterns of trade?

Answer 7

1. directional
2. composition
3. volume