Scribd
Upload
9 views12 pages

IB CH 5(1) (1)

Uploaded by

thameralbassam9
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
9 views12 pages

IB CH 5(1) (1)

Uploaded by

thameralbassam9
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 12

International Business

Sixteenth Edition, Global Edition

Chapter 5
Trade and Factor
Mobility Theory

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Learning Objectives (1 of 2)
5-1 Understand why policymakers rely on international trade
and factor mobility theories to help achieve economic
objectives
5-2 Illustrate the historical and current rationale for
interventionist and free trade theories
5-3 Describe theories that explain national trade patterns

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Learning Objectives (2 of 2)
5-4 Explain why a country’s export capabilities are dynamic
5-5 Summarize the reasons for and major effects of
international factor movements
5-6 Assess the relationship between foreign trade and
international factor mobility

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Let’s Think!!!!

You are hosting a baby shower for your friend. You


live in a flat located in Obhur, and you don’t have a
house maid.
How would you do the catering? Are you going to
cook and bake? What are your options?

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Factor Mobility and Trade Theory Questions
Objective 5-1

• What is Factor Mobility? (movement of capital,


technology, and people)
• Trade theory and focus on IB
• What products should we import and export?
• How much should we trade?
• With whom should we trade?
• Countries are linked internationally by trade in goods
and services and the movement of production factors

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Interventionist Theories
Objective 5-2
• What is Mercantilism? Holds that a country’s
wealth is measured by it’s holding of “treasure”,
aca gold. According to this theory, countries
should export more than they import.
– Governmental policies (colonies), To run a
trade surplus, governments restricted imports
and subsidized noncompetitive production.

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Free Trade Theories
Objective 5-2
• Why Trade at all?
• Absolute Advantage (different countries produce some
goods more efficiently than others, specialization will give
competitive advantage)
– Natural Advantage (which is coming from climatic
conditions, access to certain natural resources or
availability of certain work forces)
– Acquired Advantage (like in manufactured goods such
as technology)

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Theories to Explain Trade Patterns

• With whom do countries trade?


– Country-Similarity theory
§ Specialization and Acquired Advantages
§ Product Differentiation
§ The Effect of Cultural Similarity
§ The Effects of Political Relationships and
Economic Agreements
§ The Effects of Distance
§ Overcoming Distance

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


PLC Theory
Objective 5-4
• What is the Product Lifecycle Theory (PLC)?
describes the stages that a product goes through from
its initial introduction to the market to its eventual
decline and withdrawal:
a. Introduction : introduced into the market
b. Growth: the product gains acceptance
c. Maturity :The product reaches its peak market
penetration.
d. Decline : the product faces market saturation
Copyright © 2018 Pearson Education Limited. All Rights Reserved.
Limitations of PLC Theory
Objective 5-4

• Exceptions to PLC Theory


– Products with high transport costs
– Highly innovative products
– Luxury products
– High maintenance products

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


The Theory and Effects of Factor Mobility
Objective 5-5

• What is the Factor Mobility Theory? refers to the


ability to move factors of production—labor,
capital, or land—out of one production process
into another

Copyright © 2018 Pearson Education Limited. All Rights Reserved.


Why Production Factors Move
Objective 5-5
• Capital
• People
• Effects of factor movements
– Brain drain

Copyright © 2018 Pearson Education Limited. All Rights Reserved.

You might also like