Theme 4:4.3 pattern of trade

Question 1

what are the 4 reasons why a countries trade?

Answer 1

-prices
-differences in factor endowment(resources to manufacture goods)
-political reasons
-product differentiation

Question 1

explain factor endowment as a reason why countries trade.

Answer 1

countries have different levels of access to FOP to manufacture goods which forces them have to import e.g. Saudi has oil whereas japan has none

Question 2

explain prices as a reason why countries trade.

Answer 2

some countries are able to produce goods at a relatively low cost in comparison to other countries.

Question 3

explain product differentiation as a reason why countries trade.

Answer 3

trade allows consumers to have a much wider choice so goods may differ in a variety of ways.

Question 4

explain political reasons as a reason why countries trade.

Answer 4

politics can influence trade through its partners and countries may sign deals with each other which lock suppliers into doing business with them.

Question 5

what are the factors that influence the pattern of trade?

Answer 5

-comparative advantage
-impact on emerging economies
-growth of trading blocs and bi-lateral trading agreements
-changes in relative exchange rate

Question 6

what is impact on emerging economies?

Answer 6

as countries grow they tend to import more. This growth can impact on the pattern of global trade. These countries will also need to export more to pay for their foreign expenditure. The pattern of trade will change as a result.

Question 6

what is growth of trading blocs?

Answer 6

trading blocs increase trade between participating countries at the expense of other countries, hence they change the pattern of trade e.g. EU trading blocs

Question 7

what is changes in relative exchange rates?

Answer 7

the exchange rate of currencies for another affects the relative prices of goods between countries