Global Economics
~
Chapter 23
Gains from international trade :
-
lower prices
(main reason for trade ,
lower prices than domestic one,
cheaper due to natural resources
quality of labour , level of
, technology (
greater choice
-
-
differences in resources
ex . Bananas ,
oil , copper ,
diamonds
,
countries needed where there is a natural supply
Singapore >
-
dependent on trade
-
economies of scale
definition : when
producing for international and domestic market >
-
demand increases
cost decreases efficient competition average cost
,
more in LR ,
more
,
reduce LR
>
-
more production >
-
lower price per unit
-
increased competition
domestic firms compete with foreign firms , greater efficiency ,
better quality ,
less expensive
-
more
efficient allocation of resources
without government interference ->
free trade makes use of world's resources most
efficiently
-
source of foreign exchange
developing countries get foreign exchange (currencies) through trade ,
can be used
for
trading with different countries
=> balance >
-
major contribution to economic
growth
, Chapter 24
Free trade :
no barriers to trade ,
move
freely between countries without government taxes/
restrictions
Protectionism : restrictions placed on free movement
Advantages of Protectionism of Protectionism
Disadvantages
1 .
Protecting Domestic Employment .
1
may roise prices
-
if some industries we in decline 2 .
Less choice for consumers
>
-
cannot compete with foreign ones
>
-
structural unemployment .
3 less competion if foreign firms are kept out
of a
country
2 .
Protecting the
economy from 4 .
Less
efficiency of resources
low-cost labour
.
5 Less innovation
-
declining domestic industries due to
importing from countries where the 6 . Less specialization >
-
would reduce polential
cost of labour is low level of world's output
(ex clothing from Asia) , argument
·
goes
against comparative advantage 7. potential trade war
lescalating tariffs
.
8 may hinder economic growth
.
3
Protecting an infant (sunrise) industry
-
industries need to be protected against
imports ,
to achieve a size to compete
leconomies of scale
4 .
To avoid the risk of over-specialization
have consequences
economy
-
can on
ex .
over-supply of coffee (world market)
falling prices >
Ethiopia
-
.
5 Strategic reasons
-
protection in case needed in times
of war
lagriculture .
...
) overstated
.
G To prevent dumping
ex . Ell surplus of butler >
-
sells
it at a
very low cost to small developing
country >
-
ruins domestic production
~
Chapter 23
Gains from international trade :
-
lower prices
(main reason for trade ,
lower prices than domestic one,
cheaper due to natural resources
quality of labour , level of
, technology (
greater choice
-
-
differences in resources
ex . Bananas ,
oil , copper ,
diamonds
,
countries needed where there is a natural supply
Singapore >
-
dependent on trade
-
economies of scale
definition : when
producing for international and domestic market >
-
demand increases
cost decreases efficient competition average cost
,
more in LR ,
more
,
reduce LR
>
-
more production >
-
lower price per unit
-
increased competition
domestic firms compete with foreign firms , greater efficiency ,
better quality ,
less expensive
-
more
efficient allocation of resources
without government interference ->
free trade makes use of world's resources most
efficiently
-
source of foreign exchange
developing countries get foreign exchange (currencies) through trade ,
can be used
for
trading with different countries
=> balance >
-
major contribution to economic
growth
, Chapter 24
Free trade :
no barriers to trade ,
move
freely between countries without government taxes/
restrictions
Protectionism : restrictions placed on free movement
Advantages of Protectionism of Protectionism
Disadvantages
1 .
Protecting Domestic Employment .
1
may roise prices
-
if some industries we in decline 2 .
Less choice for consumers
>
-
cannot compete with foreign ones
>
-
structural unemployment .
3 less competion if foreign firms are kept out
of a
country
2 .
Protecting the
economy from 4 .
Less
efficiency of resources
low-cost labour
.
5 Less innovation
-
declining domestic industries due to
importing from countries where the 6 . Less specialization >
-
would reduce polential
cost of labour is low level of world's output
(ex clothing from Asia) , argument
·
goes
against comparative advantage 7. potential trade war
lescalating tariffs
.
8 may hinder economic growth
.
3
Protecting an infant (sunrise) industry
-
industries need to be protected against
imports ,
to achieve a size to compete
leconomies of scale
4 .
To avoid the risk of over-specialization
have consequences
economy
-
can on
ex .
over-supply of coffee (world market)
falling prices >
Ethiopia
-
.
5 Strategic reasons
-
protection in case needed in times
of war
lagriculture .
...
) overstated
.
G To prevent dumping
ex . Ell surplus of butler >
-
sells
it at a
very low cost to small developing
country >
-
ruins domestic production
