Unit 7.4-Economics Flashcards
Which inflation can be good for firms and why
Demand pull-firms can increase profit margins by higher prices without costs rising
What happens in the short run and long run following a rise in inflation
Short run consumers may buy before prices go up further.
Long run spending falls
Why is high inflation bad (2)
Price wage spirals
Less internationally competitive
Protectionism pros cons (2,2)
Protect domestic employment, boots growth
Protects infant industries from MNC’s
Retaliation
Prices of imports may rise as well as domestic as less competition and quality may also fall
Free trade pros (3)
Specialisation-increase output and living standard
Economies of scale
More choice and lower prices
Reasons for globalisation
Outsource to lower costs
Containerisation-cheap transport of goods
Improvements in IT/Transport
Free movement of labour/financial capital
How to advertise global brands e.g McDonalds (2)
Internet-allows access to global market without setting up there by offering overseas shipping
International broadcasting e.g TV programmes
What are emerging economies
Countries with fast growth but not fully developed
4 main emerging economies
China India Brazil Russia
Why are emerging economies a good opportunity (2)
Offer good returns due to rapid growth, labour costs also cheap.
Creates a new middle class, eager to spend on luxuries they never could afford, creating more growth
Why are emerging economies risky investments?
Less stable conditions e.g political changes, currency fluctuations or infrastructure problems
Why is China significant for UK businesses (4)
Removed it’s protectionist policies and joint WTO in 2001. Means UK firms can export more
Large populations, profitable market if they can get demand there.
Recent economic growth produced many rich, so potential for UK luxury products to be sold
Reduce costs by outsourcing
Difficulties with China (3)
Despite high GDP-GDP per capita is low-income distributed unfairly, so market not as big as perceived.
Language and cultural barriers can prevent trading.
Exchange rate fluctuations, e.g SPICED will reduce demand for UK exports
Problems with India
Protectionist-limits UK business in the Indian market
