Specialisation and free trade Cambridge IGCSE Economics (9–1) revision
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In plain words
No country makes everything it uses. Each concentrates on what it can produce best or most cheaply, and trades for the rest. Bananas come from where bananas grow well.
Free trade means letting that happen without taxes or limits at the border.
6 things to know
- Specialisation by country is when a country concentrates on producing the goods and services that it can make at the lowest cost, or that its resources suit best.
- Advantages of specialisation: higher world output, lower costs through economies of scale, and more efficient use of resources.
- Disadvantages: over-dependence on a few products, which is risky if demand or prices fall, and reliance on other countries for essentials.
- Free trade is international trade without restrictions such as tariffs and quotas.
- Advantages of free trade: lower prices and more choice for consumers, cheaper materials and bigger markets for firms, and competition that pushes firms to be efficient.
- Disadvantages: home firms may be unable to compete with imports and close, causing unemployment, and new industries may never get the chance to grow.
Tips and tricks
- Specialisation and trade go together. A country that specialises must trade, because it no longer makes everything it needs.
- Give advantages and disadvantages for a named group: consumers, firms or workers. Free trade is good for shoppers and hard on workers in industries that face cheap imports.
It lands in your notebook with its questions as flashcards.
Specialisation and free trade: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Free trade means trade
There are no tariffs, quotas or other barriers.
Which is an advantage of free trade to consumers?
Goods can come from anywhere in the world.
Why might free trade cause unemployment in a country?
Workers in those industries lose their jobs.
A country concentrates on producing coffee and sells it abroad to buy other goods. This is
It focuses on what it produces best and trades for the rest.
How can specialisation lower a firm's costs?
Selling to the whole world lets firms produce far more, at a lower cost per unit.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 8 marks. Write your answers on paper, then check them.
Specialisation and free trade
Cambridge IGCSE Economics (9–1) 0987 · 8 marks · papermunch.org
Name ______________________________ Date ______________
Define free trade.[2]
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International trade that takes place without restrictions such as tariffs and quotas.
Explain two benefits of free trade to consumers.[3]
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Imports compete with home-produced goods, so prices are lower. Consumers can also buy goods from all over the world, so they have a wider choice.
Explain one risk for a country that specialises in a single export.[3]
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If world demand for the product falls, or its price drops, the country's export earnings fall sharply and it has few other products to sell, so incomes and jobs are lost.
Answers: Specialisation and free trade
- 1. International trade that takes place without restrictions such as tariffs and quotas.
- 2. Imports compete with home-produced goods, so prices are lower. Consumers can also buy goods from all over the world, so they have a wider choice.
- 3. If world demand for the product falls, or its price drops, the country's export earnings fall sharply and it has few other products to sell, so incomes and jobs are lost.