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Theme 4 Section 4.1
Edexcel Business Theme 4
| Question | Answer |
|---|---|
| What is an emerging economy | An emerging economy is an economy in the process of fast growth and industrialisation |
| What are the features of an emerging economy? | 1. Fast rates of GDP Growth 2. Ongoing reduction in poverty 3. Growth of secondary and tertiary sectors |
| What are the business opportunities in emerging economies? | 1. Rising incomes = rising demand for 'middle class' goods/services 2. Low cost labour which is often high skilled 3. Joint Ventures and takeovers 4. Rising demand for capital goods |
| What are the risks of doing business in an emerging economy? | 1. Cultural barriers 2. Corruption and political instability 3. Lack of education of workforce 4. Demand is more income elastic |
| What are the implications of growth for individuals? | 1. Threat of job losses in some industries in the west 2. Reduced poverty for those in the developing countries 3. Access to lower cost goods and services |
| Who are the BRIC countries? | Brazil, Russia, India, China |
| Who are the MINT countries? | Mexico, Indonesia, Nigeria and Turkey |
| What is GDP per capita? | Total real GDP per year divided by population for a particular economy |
| What is the HDI and what does it include? | Human Development Index: A combination of masures of economic wellbeing, health and education |
| Why are HDI and GDP per capita less accurate? (EVAL) | They do not take into account the distribution of income and therefore dont account for inequality |
| What is a PPP adjustment? | Purchasing Power Parity. It adjusts the value of a currency, normally upwards, to reflect living costs in a country. It can be used to make GDP per capita more accurate |
| What is international trade? | The exchange of goods and services between businesses and other businesses or consumers based in different nations. |
| What are the benefits of trade? | 1. Economies of scale 2. More competition between businesses improves efficiency and lowers prices 3. Increased exporting creates jobs and provides income which can reduce poverty 4. Knowledge is shared between nations |
| What the downsides to international trade? | 1. Rising competition can force some industries into decline e.g. UK steel 2. Job losses may also occur as above 3. Pollution from transport of goods 4. Increased inequality |
| Why do countries specialise? | Nations which are more efficient in producing certain goods/services can benefit from comparative advantage. Their lower unit costs allow them to gain a competitive advantage and therefore sell at lower prices than global rivals. |
| What is FDI? | Foreign Direct Investment: When a business purchases assets in another country or purchases shares of an overseas business. |
| Why does FDI help a business to grow? | 1. Can help establish a global brand 2. Provides easier access to raw materials which helps increase output 3. Avoids protectionism 4. Exploiting lower labour costs can reduce operating costs and make a business more competitive |
| What is the OECD definition of globalisation? | The geographic spread of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets.” |
| What contributes to increased globalisation? | 1. Trade Liberalisation 2. Reduced Shipping Costs 3. Reduced communication costs 4. EoS 5. Growth of MNC's 6. Growth of FDI 7. Migration 8. Structural changes in economies |
| What are the benefits of trade liberalisation? | 1. Greater EoS 2. More competitive markets - better efficiency and lower prices 3. Rising incomes per head 4. Increased access to funds 5. Knowledge sharing |
| What are the drawbacks to trade liberalisation? | 1. Inequality 2. Increased exposure to global economic shocks 3. Race to the bottom - reduced corporate taxes and reduced labour regulations as countries seek FDI 4. Unemployment due to structural changes 5. Cultural erosion - global brands dominate |
| What are economies of scale (EoS)? | Reductions in cost PER UNIT achieved by operating with a larger output. |
| What is a tariff? | An import tax that increases the price of goods purchased from an overseas supplier |
| What is a quota? | A physical limit on the number of imported goods |
| What are the advantages of a tariff? | 1. Protects domestic industry and jobs* 2. Provides revenue for government * only if no or limited retaliation |
| What are the disadvantages of a tariff? | 1. Threat of retaliation 2. Raises the import price for domestic consumers - Important if the good is essential |
| What are the advantages of a quota? | 1. Protects domestic industry and jobs* 2. Simple to impose * only if no or limited retaliation |
| What are the disadvantages of a quota? | 1. No revenue for government 2. Risk of retaliation 3. Requires detailed checking of imports |
| Which other forms of protectionism exist? | Export subsidies, regulatory barriers, copyright laws, currency manipulation |
| Arguments for protectionism | Infant Industry Prevent dumping Strategic Industry support Cultural preservation |
| Arguments against protectionism | Trade wars Higher prices may cause imported inflation Retaliation will raise costs for exporters |
| Examples of trading blocs | EU ASEAN NAFTA |
| What are the benefits of a trading bloc? | More competition improves efficiency Firms can benefit from economies of scale More trade allows exploitation of comparative advantage |
| What are the 4 freedoms of the EU? | Free movement of goods Free movement of services Free movement of capital Free movement of labour |
| What are the negatives of trading blocs? | Restricts access to markets outside the bloc Local firms may suffer from competition within the bloc They are just a larger and wider form of protectionism |
| How will Brexit affect UK businesses? | Loss of trade with the EU Possibility of tariffs with the EU A weaker pound increases import costs but might boost exports Less EU regulations perhaps It depends on what the new deal with the EU is and if the EU is a vital market for the specific firm |
Created by:
mrholland
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