Trade Flashcards
what does PPF stand for
production possibilities frontier
what does the ppf show
a graphical representation of 2 goods that can be produced by diverting resources from one good to another
what is a comparative advantage
when the opportunity cost of producing a good is lower than another country
is it possible for a country to be able to produce more of a good but still lack comparative advantage
yes
eg germany technically has more resources and could produce more pharmaceutical goods than ireland but this would mean they’d have to allocate those resources away from a market their even more productive in eg car manufacturing
after beginning to export a good, is the world price higher or lower than the domestic price
higher
how does opening up to trade make a country more efficient
with trade, extra surplus is created that didn’t belong to either consumers or producers before
who gains more from exporting, consumers or producers
producers as there is more demand for their product
consumers have a higher price
who gains more from importing, consumers or producers
consumers as they gain lower prices from imported goods
producers domestically find it hard to compete with world prices
after beginning to import, is the world price higher or lower than the domestic price
lower
why would a country want to have trade policy
to protect domestic producers eg farmers
types of restrictive trade policy
tariffs
quotas
other non tariff barriers
example of trade policy used in past
by US and UK to create successful industries
what does WTO stand for
world trade organisation
what is half of all irish exports made up of
chemicals and computer services
up to what % does US apply tariffs on Chinese products
25%
benefit of free trade
increases economic output and income