gcse economics - international trade - introduction

KEY THINGS TO CONSIDER IN INTERNATIONAL TRADE

• WHY DO WE TRADE WITH OTHER COUNTRIES?

• WHAT DO WE EXPORT (SELL ) ABROAD)?

• WHAT DO WE IMPORT (BUY) FROM ABROAD?

• WHAT IS THE BALANCE OF PAYMENTS?

• WHY DO EXCHANGE RATES MATTER?

• SHOULD WE KEEP THE £ OR JOIN THE EURO?

WHY DO COUNTRIES TRADE WITH EACH OTHER?

- To obtain goods that they cannot produce themselves
- To increase choice for their consumers
- To obtains goods at a cheaper price than what they can produce themselves
- To make more revenues and profits. It an extra place in which to sell their goods
- Countries specialise in the production of goods and services at which they are better.
- To exploit a comparative or absolute advantage.

COMPARATIVE ADVANTAGE

Where one country can produce a good at a relatively cheaper cost in terms of other goods than another producer. (page )

ABSOLUTE ADVANTAGE

Where one producer is better at producing a product than another producer.

UK AND COMPARATIVE ADVANTAGE

In recent years the UK had a comparative advantage in a number of manufacturing industries such as textiles or motorcycles.

This was because the UK had lots of natural resources and raw materials, trained workers and lots of relevant machinery.

However, now this advantage has been lost to other areas of the world particularly Asia. They have extremely cheap labour, new technology and low transport costs.

UK’s comparative advantage now may well be in

- financial services (insurance / banking)
- tourism
- music

ACTION

A Have a look at the labels on your clothes and personal goods. How many have been imported? Why is this?
B Can you think of any local businesses who export abroad? Why do they do this?

These GCSE Economics revision notes have been kindly provided by Peter Davies of Mill Hill School, Ripley Keep Up-todate with your GCSE Economics - Subscribe Free to Economics in the News by Email

 

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