T6 Trade

Question 1

What is absolute advantage

Answer 1

Where an economy greater total of goods than another using the same input

Question 2

What is comparative advantage

Answer 2

Where one economy can produce a good at a lower opportunity cost than another - occurs when that economy is specialised in that area

Question 3

What are some criticisms of comparative advantage(3)

Answer 3

Costs of trade are ignored
The externatlities of the trade
Potential of diseconomies of scalen(due to increased usage of resources and specialisation)
Other industries can be neglected
Not everyone will benefit from the economic welfare increase

Question 4

What is specialisation

Answer 4

Where economies focus on a certain area of skills, etc to be the best at producing/doing it

Question 5

What are some advantages of specialisation(3)

Answer 5

Inc output and efficiency 
Economies of scales gained
Lower costs 
Comparative advantage 
Increased AD

Question 6

What are some disadvantages of specialisation(3)

Answer 6

Can cause reliance on one are of the economy
Can cause an econonomy to put all eggs in one basket
Prices of commoditites can fluctuate
Relies on imports for access to other goods
Could cause structural unemployment

Question 7

Why do countries trade?(4)

Answer 7

Creates jobs 
Enhances economies 
Specialisation 
Ability to exploit economies of scale 
International links
Tech shared 
FDI
Comparative advantage

Question 8

Benefits of trade(4)

Answer 8

Better balance of payments 
Economies of scale and specialisation 
Lowerprices 
Comparative advantage 
Inc consumption 
More competition 
Inc SoL
Access to tech

Question 9

Negatives of trade(4)

Answer 9

Some industries may lose out - can cause structurak unemployemnt
Developing economies may struggle to compete
New infant industries can find it hard to set up
Can cause a balance of payments deficit
Negative externalities

Question 10

What are tarrifs

Answer 10

A tax on imports

Question 11

What are the purpose of tarrifs(5)

Answer 11

Protects local economy from international competition
Can prevent consumption of negative products
Raise tax revenue
Deter dumping
Allow infant industries to grow

Question 12

Negatives of tarifs

Answer 12

Higher prices, cause a decrease in purchasing power
Weakens trade relations
If a product is in demand,it can be exploited

Question 13

What are quotas

Answer 13

An protectionism set by the government - putting a cap on the total amount of a foreign product coming into the economy

Question 14

What are some benefits of quotas(3)

Answer 14

Helps regulate volumes of trade
Can stop certain products being over consumed and allow domestic production to increase
Protects local economy from foreign comp

Question 15

What are some negatives of quotas(3)

Answer 15

Limits the range of products consumers have access to
Can cause demand pull inflation
Sellers can exploit consuemrs

Question 16

What are some other import proctention(4)

Answer 16

Subsidise to help domestic industries
Lowering the exchange rate
Import and export licenses
Saftey and legal measures

Question 17

What are some overall effects of trade barriers on elastic products

Answer 17

Tarrifs etc, increase the price of products, causing demand to fall, increasing demand for domestic products

Question 18

What are the effect of trade barriers on inelastic products

Answer 18

Government can increase things like tarrifs and exploit it to increase tax revenue as demand for inelastic products does not change

Question 19

What are some overall issues with import protection(4)

Answer 19

Loss of economic welfare 
Demand pull inflation 
Cost push inflation 
Less of a chance of economies of scale 
Decrease product choice
 Less competition - less innovation etc
Possible exploitation

Question 20

What are arguments for impor protection

Answer 20

Protects domestic jobs 
Infant industries have a chance to grow 
Can protect the domestic economy from unfair competitiom 
Helps battle a BoP deficit 
Source of government inflows