Absolute advantage
If it can produce goods/services using fewer resources and at a lower cost than another country
Comparative advantage
when a country can produce a good/service at a lower opportunity cost than another country. So they specialise in their lowest opp cost
Free trade
The movement of goods and service across borders without barriers to trade
Benefits of free trade
- Increased efficiency: int’l competition as lowers production cost and increases output
- Economic growth due to high exports
- Consumer choice as theres a greater range of goods/services
Changes in pattern of UK trade w the rest of the world - comparative advantage
- Growth in exports of manufactured goods from developing country to developed countries. Developing countries have gained advantage in production die to their low labour costs
- The deindustrialisation of countries such as the UK has meant the manufacturing sector has declined. So production of manufactured goods have shifted to other countries (China) whilst the UK focuses on more services like finance
Changes in pattern of UK trade w the rest of the world - emerging economies
More countries are participating in world trade
- International trade is more important for developing countries than developed countries. Contributes towards 20% of LDC economies compared to 8% of the US economy
Protectionism
implementing policies to protect an economy through restrictions on imports
Tariffs
Taxes on imports which increase the price. Could lead to contraction of demand so exports decrease. Tariffs are to increase the demand for domestic goods
Quota
Limits the quantity of foreign produced goods that’s sold on the domestic market
- In June 2022 the Uk extended its quota on steel imports to protect employment in the domestic steel industry
Export subsidy
A form of govt intervention to encourage goods to be exported rather than sold on the domestic market.
