Theme 3 Flashcards
Implications of economic growth for individuals and firms
- Trade opportunities for firms
- Increased profits
- Rationalisation
- Employment factors
Rationalisation
Reorganisation in the scale of a firm’s operations in order to increase efficiency.
(GDP) per capita
National Income / Population
Trade creation
Trade shifts as a result of membership of a trading bloc from a high cost producer to a low cost producer.
Trade diversion
Trade shifts as a result of membership of a trading bloc from a low cost producer to a hig cost producer due to no tariffs.
Protectionism
When a country takes action to protect its own industries by restricting trade with other countries.
Arguments in favour of protectionism
- Infant industries
- Dumping
- Domestic Employment
- Externalities
- Balance of payments
Protectionist measures
- Tariffs
Charge plced on goods an services
- Import Quotas
Physical limit on the volume of imports entering a country
- Government legislation
Complex legal forms
- Domestic Subsidies
Payments to domestic businesses to reduce costs
- Embargoes
Total ban on imported products
Marshall-Lerner condition (MLC)
Depreciation of the exchange rate will only improve a current account deficit if the sum of the PED for net exports is greater than 1
- If less it will only worsen
Push factors
Force a business to leave the market in which they currently operate.
- Saturated markets
All customers already have the product that business sells
- Competition
Business will struggle to survive in market
Pull factors
Attracts a business to a global market.
- Economies of scale
- Risk spreading
Less reliant on 1 market
Off-shoring
Occurs when a business relocates production to another country.
Outsourcing
Occurs when a business contracts out production to another business.
Factors influencing expansion into a market
- Levels and growth of disposable income
- Ease of doing business
- Infrastructure
- Political stability
- Exchange rate
Factors influencing the location of production sites
- Costs of production
- Skills and availability of labour force
- Infrastructure
- Location in trade bloc
- Government incentives
- Ease of doing business
- Political stability
- Natural resources
- Likely ROI
Global marketing strategy
Adaptation of a marketing strategy to target all markets on a worldwide scale.
Glocalisation
Adaptation of a global marketing strategy in order to meet the requirements of local geographic markets.
Different approaches to global markets: ethnocentric
Promotion of the product is undertaken based on the beliefs of the home nation.
Different approaches to global markets: geocentric
Promotion of the product is undertaken based on a global or worldly point of view.
Different approaches to global markets: polycentric
Promotion of the product is undertaken based on the beliefs of the host nation.
Cultural/social factors
Lifestyle, customs and values of a group of people.
Cultural differences
Occur because different types of people have different lifestyles, customs and values.
Multinational corporations
Business that is operated from one country but has facilities and assets in more than one country.
Impact of MNCs on the local economy
Local Labor
- Jobs with better opportunities and higher wages
- But can create wage inflation and exploit workers
Local Firms
- Imporves infrastructure
- But loss of sales of substitute goods, loss of talented workers
Local Community
- Higher employment, low crime, infrastructure
- But environmental disasters and loss of culture
Impact of MNCs on the national economy
- Economic growth
- FDI flows
- Balance of payments
- Technology and skill transfer
- More choice for consumers
- Tax revenue
Ways to control MNCs
- Political influences
- Legal control
- Pressure groups
- Social media
- Self-regulation
Self-regulation
Occurs when firms in an industry regulate themselves and monitor their own standards .
Employment patterns
- Increase in living standards
- Growth of labor force
- Structural change
- Interdependence of labor markets
Monetary factors
Financial rewards for a worker supplying their labour to a firm.
Non-monetary factors
Non-financial rewards for a worker supplying their labour to a firm.
- Working conditions
- Finge benefits
- Job satisfaction
Factors influencing the supply of labour include
- Population migration
- Income tax and benefits
- Government regulations
- Trade unions
Labour immobility
Occurs because it is difficult for labour to be put to alternative uses due to lack of skills or experience.
Derived demand
Occurs as a result of demand for a product.
Individual/Collective bargaining
Individual
- One employee negotiates with an employer on their own behalf.
Collective
- Trade union negotiates with an employer on behalf of all employees.
Industrial action
Trade union members engage in activities designed to reduce productivity in the workplace.
Poverty
Individuals or households are deprived of material possessions and income which stops them from having a decent standard of living.
Absolute poverty
Individuals or households are deprived of basic human needs.
Relative poverty
Individuals or households are poor in comparison to the rest of the population.
Causes of poverty
- Age
- Low wages and unwaged
Measures of poverty
- Income
- Consumption
- Material deprivation
Economic development
The process of improving people’s economic well-being and quality of life.
Factors that improve development and growth
- Investment
- Education
- Training
Barriers to development and growth
- Corruption
- Institutional factors
- Poor infrastructure
- Poor human capital
Aid
Voluntary transfer of resources from one country to another.
Types of aid
- Emergency Aid / Disaster Relief
- Tied Aid
Country donates money/resources with conditions - Bilateral Aid
Assistance given by a government directly to the government of - Multilateral Aid
Assistance provided by many governments - Developmental Aid
Funds are used to finance a particular project - Debt Relief
Income/Wealth inequalities
Income Inequlities
- Difference in the earnings people receive
Wealth Inequalities
- Difference in the amount of assets owned by people
Income/Wealth
Income
- Flow of earnings of individuals or households.
Wealth
- Stock of financial assets e.g. houses owned by individuals or households.
Progressive/Regressive tax
Progressive tax
- Higher rate of tax is paid as incomes increase.
Regressive tax
- Lower rate of tax is paid as incomes increase.
