Module 2 Flashcards
An _______ or _________, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area.
It includes the combination of the various institutions, agencies entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community.
Economic system or Economic order
Three broad types of economic systems:
(1) Market economy
(2) Command economy
(3) Mixed economy
An economy in which the greater part of the production, distribution, and exchange is controlled by individuals and privately owned corporations rather than by the government, and in which government interference in the market is minimal.
Market economy
Is a system where the government, rather than the free market determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale. It also determines investments and incomes.
Command Economy
means that a part of the economy is left to the free market, and part of it is managed by the government. This type of economy start from the basis of allowing private enterprise to run most businesses.
Mixed Economy
Items of International Trade
(1) Visible
(2) Invisible
(3) Import
(4) Export
The items of international trade consist of goods and services, the former being referred to at times as _______ items, whereas the later are invariably described as _______ items.
visible; invisible
Based upon their movement and destination, such items (visible and invisible) are classified as _______ and _______ .
imports and exports
Imports, from the Latin in which means “in” and “porto” meaning ______, are items that enter into a port coming from foreign one.
“carry”
What are the Advantages of International Trade?
(1) Increased revenues
(2) Decreased competition
(3) Longer product lifespan
(4) Easier cash-flow management
(5) Better risk management
(6) Benefiting from currency exchange
(7) Access to export financing
(8) Disposal of surplus goods
(9) Enhanced reputation
(10) Opportunity to specialize
What are some Disadvantages of International trade?
(1) Shipping Customs and Duties
(2) Language Barriers
(3) Cultural Differences
(4) Servicing Customers
(5) Returning Products
(6) Intellectual Property Theft
One of the top advantages of international trade is that you may be able to increase your number of potential clients. Each country you add to your list can open up a new pathway to business growth and increased revenues.
Increased revenues
Your product and services may have to compete in a crowded market in the U.S, but you may find that you have less competition in other countries.
Decreased competition
Getting paid upfront may be one of the hidden advantages of international trade. When trading internationally, it may be a general practice to ask for payment upfront. Expanding your business overseas could help you manage cash flow better.
Easier cash-flow management
Focusing only on the domestic market may expose you to increased risk from downturns in the economy, political factors, environmental events and other risk factors.
Selling a product to an overseas market can extend the life of an existing product as emerging markets seek to buy American products.
Longer product lifespan
One of the significant advantages of international trade is market diversification. Focusing only on the domestic market may expose you to increased risk from downturns in the economy, political factors, environmental events and other risk factors.
Better risk management
Those who add international trade to their portfolio may also benefit from currency fluctuations. For example, when the U.S dollar is down, you may be able to export more as foreign customers benefit from the favorable currency exchange rate.
Benefiting from currency exchange
Another one of the advantages of international trade is that you may be able to leverage export financing.
Access to export financing
One of the advantages of international trade is that you have an outlet to dispose of surplus goods that you’re unable to sell in your home market.
Disposal of surplus goods
Doing business in other countries can boost your company’s reputation. It can help increase your company’s credibility, both abroad and at home.
Enhanced reputation
International markets open up avenues for a new line of service or products. It can also give you an opportunity to specialize in different area to serve that market.
Opportunity to specialize
International shipping companies like FedEx, UPS and DHL make it easy to ship packages almost anywhere in the world. However, one of the disadvantages of international trade is that most of these destination countries’ customs agencies charge extra fees on items shipped to them.
Shipping customs and duties
In addition to the cost of their product, a company needs to understand what the end customer will be charged by the international shipping company. This is sometimes referred to as the ________ .
“landed cost”
Despite the availability of online translators, language is still one of the major disadvantages of international trade.
Language barriers
The marketplace is filled with examples of ______________ with names that got misconstrued in another language.
poorly translated products
What makes this one of the major disadvantages of international trade is that _________ , many times, are never documented. They are the unwritten rules of commerce in that country that are hard to uncover and can be even more difficult to solve.
cultural differences
After international customers make a purchase, how will they be serviced when they are so far away? Again, language and cultural differences need to be considered to overcome one of the major disadvantages od international trade.
Servicing customers
Since not all international customers will be satisfied with a company’s products, a process must be in place to return them and process a refund.
Returning products
The wider a product is distributed, the more likely that it may be illegally copied by a competitor. This can be in the form of proprietary information or market branding.
Intellectual Property Theft
