Study Notes
International trade and globalisation involve the exchange of goods and services across borders and the increasing interconnectedness of economies.
- International Specialisation — when a country focuses on producing goods it can make most efficiently. Example: India specialising in call centres due to its cheap labour force.
- Absolute Advantage — when a country can produce more of a good with the same resources than another country. Example: India has an absolute advantage in call centres compared to Western countries.
- Comparative Advantage — when a country can produce a good at a lower opportunity cost than another. Example: Philippines having a comparative advantage in call centres over India.
- Globalisation — the process of interaction and integration among people, companies, and governments worldwide. Example: The spread of multinational companies like Starbucks and IKEA.
- Multinational Corporations (MNCs) — businesses operating in multiple countries. Example: Toyota having factories in several countries.
- Free Trade — trade without restrictions between countries. Example: Increased consumer choice and competition.
- Trade Protection — use of trade barriers to restrict imports. Example: Tariffs and quotas to protect domestic industries.
Exam Tips
Key Definitions to Remember
- International Specialisation
- Absolute Advantage
- Comparative Advantage
- Globalisation
- Multinational Corporations (MNCs)
- Free Trade
- Trade Protection
Common Confusions
- Confusing absolute advantage with comparative advantage
- Misunderstanding the role of MNCs in both home and host countries
Typical Exam Questions
- What is international specialisation? It is when a country focuses on producing goods it can make most efficiently.
- How do MNCs benefit host countries? They provide employment, transfer skills, and contribute to GDP.
- What are the disadvantages of free trade? It can lead to exploitation of workers and increased income inequality.
What Examiners Usually Test
- Understanding of the advantages and disadvantages of international specialisation
- The impact of globalisation on economies
- The role and effects of trade protection measures