int business notes u2 ch 6 book

Mercantilism

An economic theory from the 16th and 17th centuries advocating export promotion and import restriction to accumulate wealth.

Trade Surplus

A positive balance of trade where exports exceed imports, essential for national prosperity according to mercantilism.

Absolute Advantage

A theory introduced by Adam Smith that suggests a country can produce a good more efficiently than another, benefiting from trade.

Comparative Advantage

David Ricardo's theory stating that countries should specialize in producing goods they can produce most efficiently and trade for others.

Heckscher-Ohlin Theory

A theory that asserts trade depends on a country's factor endowments (land, labor, capital), rather than just productivity.

New Trade Theory

A theory that emphasizes economies of scale and first-mover advantages in shaping international trade patterns.

Domestic Rivalry

The competition among firms within a country that fosters innovation and competitiveness in international markets according to Porter.

Economies of Scale

The reduction in per-unit cost as production scales up, allowing firms to produce more efficiently.

First-Mover Advantage

The competitive advantage gained by the first significant company to move into a market, achieving economies of scale early.

National Competitive Advantage

Michael Porter's concept explaining why certain countries excel in specific industries based on various competitive factors.

Trade Barriers

Government-imposed restraints such as tariffs and quotas that benefit producers but harm consumers.

Laissez-Faire Approach

An economic philosophy advocating minimal government intervention in trade, allowing market forces to determine imports and exports.

Market Forces

Natural economic factors that describe how supply and demand interact in trade without government interference.

Subsidizing Exports

Government policies that aim to make domestic products more competitive in global markets by financially supporting exporters.

Limiting Imports

Government interventions aimed at reducing foreign goods entering a domestic market, usually through tariffs or quotas.

Thomas Mun

An economist known for articulating mercantilist principles, emphasizing a favorable balance of trade to increase national wealth.

David Hume

An economist who critiqued mercantilism, arguing that trade surpluses could not be sustained over time.

Zero-Sum Game Fallacy

The idea within mercantilism that trade benefits one country at the expense of another, discounted by later economists.

Neo-Mercantilism

Contemporary policies resembling mercantilist thought, focusing on trade surpluses and government intervention in economies.

Gains from Trade

The benefits derived from specialization and trade that lead to increased production and consumption.

Product Life Cycle Theory

A theory stating that products start in their home country and gradually move abroad as they mature.

Supportive Industries

Industries that facilitate creating competitive advantages by providing necessary inputs and technology.

Domestic Demand

The demand for goods and services in a country's economy that influences innovation and industry competitiveness.

Rivalry

Competition among local firms that stimulates improvements and maintains competitive positions in global markets.

Management Ideology

The overarching management style adopted by firms in a country, which can enhance or hinder competitiveness.

Factor Conditions

The availability and quality of factors of production, such as skilled labor and capital, that influence a nation's competitive advantage.

Related Industries

Industries that provide inputs and services to one another, fostering innovation and cost advantages in a nation's economy.

Wassily Leontief

An economist known for the Leontief Paradox, which questioned the Heckscher-Ohlin theory of trade based on U.S. export patterns.

Paul Samuelson

An economist who critiqued free trade's impact on U.S. wages, particularly concerning offshoring jobs to lower wage countries.

Outsourcing

The practice of relocating jobs and production to other countries to take advantage of lower labor costs.

Trade Liberalization

The process of reducing trade barriers to encourage free trade between countries.

Specialization

The focus of a country on the production of specific goods that it can produce most efficiently, often resulting in enhanced productivity.

Trade Liberalization Benefits

The long-term advantages of open trade, including economic growth and improved living standards.

MIT Study by David Autor

Research showing the negative impacts of trade exposure to China on U.S. manufacturing jobs and economic stability.

Trade Patterns

The regularities observed in international trade, influenced by various factors such as resource availability and production capabilities.

Technological Advancements

Innovations that can influence labor markets, trade dynamics, and the development of competitive advantages in industries.

Strategic Trade Policy

Government interventions aimed at enhancing the competitiveness of domestic industries on the global stage.

Key Takeaways of Trade Theory

Summary points highlighting the importance of comparative advantage, the benefits of free trade, and the ongoing debate about government intervention in trade.

Vernon’s Product Life Cycle

Theory suggesting products have a life cycle that begins in their home country and moves internationally as they mature.

Favorable Balance of Trade

A trade situation where a country exports more than it imports, traditionally viewed as a measure of economic strength.

Industrial Policy

Government policy aimed at promoting certain industries to improve national competitiveness and economic growth.

Long-Term Welfare Gains

The substantial benefits to a country's economy and society from trade over an extended period, despite short-term challenges.

Tariffs and Quotas

Instruments of trade policy designed to restrict imports and protect domestic industries.

Economic Growth Studies

Research findings by economists showing a correlation between open trade policies and higher growth rates in economies.

Public Policy on Trade

The stance that governments take concerning trade restrictions and liberalization to influence economic performance.

Specialization and Trade Gains

The increase in both production efficiency and consumption available to countries skilled in specific industrial outputs.

Michael Porter's Competitive Advantage

Framework that analyzes factors like demand conditions, factor endowments, and rivalry that shape industry competitiveness.

Porter's Diamond Model

A strategic model that identifies factors determining national competitive advantage in specific industries.