International Trade Theories and Global Economy

These flashcards cover key concepts and terminology related to international trade theories and economic principles, useful for understanding the dynamics of global commerce.

Mercantilism

An economic philosophy advocating that countries should encourage exports and discourage imports, considering wealth to be measured by gold reserves.

Absolute Advantage

A scenario where one entity can produce a product more efficiently than another entity, often resulting in a higher quality output.

Comparative Advantage

An economic theory proposing that countries should specialize in producing goods where they have a lower opportunity cost, allowing for more efficient trade.

Heckscher-Ohlin Theory

A theory suggesting that countries will export goods that utilize their abundant factors of production and import goods that require scarce factors.

New Trade Theory

A concept emphasizing the role of economies of scale and first-mover advantages, suggesting that certain industries can remain dominated by a few firms due to these advantages.

Porter's Diamond Theory

A model explaining national competitive advantage based on four determinants: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry.

Product Life Cycle Theory

A theory that suggests the location of production and the flow of trade will shift as a product matures and its demand grows in other countries.

Trade Protectionism

Economic policy aimed at shielding domestic industries from foreign competition through tariffs and quotas.

International Trade

The exchange of goods and services across international borders, allowing countries to specialize and benefit economically.

Trade Barriers

Government-imposed regulations such as tariffs and quotas that restrict international trade to protect domestic industries.