Th1.1: Specialisation in Production of Goods and Services to Trade

Question 1

If countries specialise, what is essential for them to do?

Answer 1

trade in order to obtain all goods and services that consumers demand

Question 2

Advantage 1 of Trade:

Answer 2

theory of comparative advantage

this will help boost economy and increase overall global output

Question 3

What does the theory of comparative advantage state?

Answer 3

countries should specialise in producing those goods where they have a lower opportunity cost and so they are relatively best at producing

Question 4

Disadvantage 1 of Trade:

Answer 4

countries may become over-dependent on one particular export and their economy could collapse

Question 5

Example of Disadvantage 1 of Trade:

Answer 5

developing countries specialise in farming and if crops fail due to weather they then have no income

Question 6

Disadvantage 2 of Trade:

Answer 6

other countries specialise in non-renewable resources and this means they could run out, resulting in huge loss for that economy

Question 7

Disadvantage 3 of Trade:

Answer 7

high interdependence which would cause problems if trade is prevented, due to war for example

Question 8

Disadvantage 4 of Trade:

Answer 8

increased specialisation may mean there will be no more competition to cut costs and therefore wages will fall