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4.1 - Global Economics - Coggle Diagram

- - - - Containerization - ability to put more containers on each ship. Huge EOS
      - G has brought many benefits such as;
        
        increased choice
        
        decreased price / deflation
        
        beneficial for the western consumers
        
        This is because the Supply curve has shifted out so price lowers and quantity increases
    - - Reshoring - bringing work and factories back to your own country
      - Some firms want shorter supply chains because it's quicker and cheaper to get goods around the country than to import them. Also allows a firm to be more nibble.
      - Robots means cheaper labour elsewhere isn't relevant anymore because a robot is the cheapest option and that can be deployed anywhere at the same cost
      - Covid has furthered this trend for de-globalisation
- - - - By each country specializing in what they can produce well (efficiently) then, with trades between countries, the supply will increases causing the price to fall.
        
        This diagram shows the unspecialized production of goods
        
        Here the opportunity cost of one banana in the UK is 10 potatoes and vice versa in Barbados. Obviously the sensible thing would be for the UK to specialize in potatoes and barbados in bananas
        
        This table shows the specialised production of goods and then the subsequent S + D diagram
      - This is all heavily linked to opportunity costs
      - Most western economies have followed this post war (WW2)
        
        The UK economy has become specialised mainly in hospitality, financial services and pharmaceuticals
      - The downside is however, dependability. Relying on one good in an economy will have a greater effect on the economy if something goes wrong.
        
        Wide based economies are less vulnerable during economic down turn and external shock.
      - Assumptions for comparative trade:
        
        constant returns to scale
        
        no transport costs
        
        no trade barriers
        
        perfect mobility
        
        externalities are ignored
      - Limitations to the law of comparative advantage:
        
        free trade isn't always fair trade. Monosomy power ca force producers to except low prices
        
        the assumptions aren't realistic
        
        If the opportunity cost is the same, the law breaks down.
      - a deficit in the trade balance can be uncompetitive
        
        countries with a high surplus may dump the good on other countries
        
        increased unemployment in some countries
        
        domestic monopolies may become global monopolies
        
        Dumping - where a product is sold in a foreign country for less than the cost of making the product
        
        trade balance - value of exports - value of imports
      - lower prices and increased choice.
        
        increased output creates jobs and raised living standards
        
        EOS
        
        reduction in power of domestic monopolies
- - - - They hold regular rounds of negotiations
        
        Each round is held in a different country.
        
        The Uruguay round lasted from 1986-94 to negotiate lower tariffs on manufactured goods.
        
        The Doha round lasted from 1999-06 and lowered tariffs on agricultural goods and intellectual property rights
        
        The common challenges are the west protecting its markets (farming and intellectual property). There are some strong beliefs between LDC's that free trade doesn't work for them. However free trade has benefited asian nations
    - - WTO - World trade organisation
  - - - This has some advantages:
        
        unites the countries
        
        easier to compare prices
        
        more currency stability
        
        more trade between the nations
        
        tends to be deflationary
      - A MU removes government control of monetary policy which is designed to reduce government manipulation of the economy for political gains. However, they also can't manipulate the economy for economic gain which is one of the mian
      - The UK decided not to join the european MU (euro-zone) because it had several disadvantages
        
        the government believed its good to control their own interest rate and monetary policy
        
        single currency only work where there is economic convergence (all the economies are similar in a MU)
        
        recent economic history suggests that places like Greece and Spain economies have struggled in the Euro-zone
- - - - Tariffs - reduces the demand for imported good and the impact depends on the magnitude of the tariff and elasticity of demand. Very inelastic demand means tariffs have little effect
        
        Without the tariff, the domestic supplier can't supply at the equilibrium as the market price is p1. This means the domestic suppliers supply 0-Q1 and the world suppliers (imports) supply Q1-Q0
        
        When the tariff in implemented the price increases to pt. This mean the domestic suppliers increases more, 0-Q2, and the world supplier supplier less, Q2-Q3. Q3-Q0 drop out of the market which means the tariff is scilaly ineffecient
        
        The benefits are clear for the government as imports decrease and domestic supply increases meaning the economy grows
      - Quota - is a physical limit on the volume of imported goods
        
        Initially we are at Q4 where 0-Q1 is dometiclly provided and Q1-Q4 provided by the world via imports.
        
        The imposed quota restricts supply and increases the price to p-quota. This encourages an increase in domestic production causing the domestic supply to shift out. Domestic produces are better off and produce from 0-Q2 whereas exports would decrease supply as only supply Q2-Q3.
        
        Q3-Q4 drop out of the market making it socially ineffeicent. 0-Q3 pay the higher price therefore they are worse off
        
        Only real difference is there is no tax for the government, that revue goes to the domestic firms.
        
        Like with the tariff, themagistude of the quota makes a differnce to the outcome of it.
      - Subsidies - this enorages firms into the market which shifts out supply and lowers price (simple S+D diaram when supply shifts out)
        
        This boosts domestic production and increases self-sufficency
        
        Oppertiunity cost for the goverment and goverment failer, creates X-ineffecieny as the firms relie on the subsidy.
      - Non-tariff barriers - (rule sand regs) many government introduce extra rules and regs which increase costs for exporters. This is known as the cost of compliance
        
        these include:
        
        healthy and safety regs
        
        environmental regs
        
        labelling of products
        
        bureaucracy
        
        This increase the costs of imports as they have to meet new regulations
        
        Main downside is that consumers are worse off and there is usually some reciprocal action which can punish successfully UK exporters.