WTO (World Trade Organisation)
World Trade Organisation (WTO): an international body responsible for negotiating trade agreements and “policing” the rules of trade to which its members sign up. Trade disputes between members are settled by the WTO.
Absolute advantage: where one country is able to produce more of a good or service with the same amount of resources, such that the unit cost of production is lower.
Comparative advantage: where one country produces a good or service at a lower opportunity cost than others.
Relative opportunity cost: the cost of production of one good or service in terms of the sacrificed output of another good or service in one country relative to another.
Terms of trade: the price of a country’s exports relative to the price of its imports. The terms of trade can be measured using the formula: {(index of avrg X prices) / (index of avrg M prices) } * 100
Trading possibility curve (TPC): a representation of all the combinations of two products that a country can consume if it engages in international trade. The TPC lies outside the PPC curve, showing gains in consumption possible from international trade.
Factor endowments: the mix of land, labour and capital that a country possesses. Factor endowments can be determined by, among other things, geography, historical legacy, and economic and social development.
Factor intensities: the balance between land, labour and capital required in the production of a good or service. Labour-intensive production: any production process that involves a large amount of labour relative to other factors of production.
Capital-intensive production: where the production of a good or service requires a large amount of capital relative to other factors of production.
Heckscher-Ohlin theory of international trade: a theory that a country will export products produced using factors of production that are abundant and import products whose production requires the use of scare resources.
Infant industries: industries in
Absolute advantage: where one country is able to produce more of a good or service with the same amount of resources, such that the unit cost of production is lower.
Comparative advantage: where one country produces a good or service at a lower opportunity cost than others.
Relative opportunity cost: the cost of production of one good or service in terms of the sacrificed output of another good or service in one country relative to another.
Terms of trade: the price of a country’s exports relative to the price of its imports. The terms of trade can be measured using the formula: {(index of avrg X prices) / (index of avrg M prices) } * 100
Trading possibility curve (TPC): a representation of all the combinations of two products that a country can consume if it engages in international trade. The TPC lies outside the PPC curve, showing gains in consumption possible from international trade.
Factor endowments: the mix of land, labour and capital that a country possesses. Factor endowments can be determined by, among other things, geography, historical legacy, and economic and social development.
Factor intensities: the balance between land, labour and capital required in the production of a good or service. Labour-intensive production: any production process that involves a large amount of labour relative to other factors of production.
Capital-intensive production: where the production of a good or service requires a large amount of capital relative to other factors of production.
Heckscher-Ohlin theory of international trade: a theory that a country will export products produced using factors of production that are abundant and import products whose production requires the use of scare resources.
Infant industries: industries in