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③ BUSINESS IN A GLOBAL SETTING Basis for International business International business: All business activities that involve exchanges across national boundaries (increase sales) ABSOLUTE AND COMPARATIVE ADVANTAGE Some countries are better equipped than others to produce particular Goods and Services. Reasons may be countries natural resources, its labor supply, or even customs to historical accidents. •Absoluteadvantage: the ability to produce a specific product more efficiently than any other nation. •Comparativeadvantage: the ability to produce a specific product more efficiently than any other product EXPORTING AND IMPORTING Countries trade when they have a surplus of the product they specialize in and want a product the other country specializes in. •Exporting: selling and shipping raw materials or products to other nations. •Importing: purchasing raw materials or products in other nations and bringing them into one’s own country. Importing and exporting are the principal activities in international trade. They give rise to an important concept called the balance of trade. •Balanceof trade = total value of its exports – the total value of its imports. •Tradedeficit: imports>exports •Unfavorable balance of trade: total imports > total exports •Favorable balance of trade: total imports < total exports •Trade deficit: is a negative balance of trade. •Balanceofpayments = total flow of money into a country – total flow of money out of that country over some period of time. oIt also includes investments, money spent by foreign tourists, payments by foreign governments etc. •Importduty(tarif): a tax levied on a particular product entering a foreign country •Continual deficit in balance of payments: other nations lose confidence in that Nations economy •Continual surplus in balance of payments: country encourages exports but limits imports by imposing trade restrictions Restrictions to international business What is a tax that is levied on a foreign product entering a country?A tariff or duty (the words are used interchangeably) is a tax levied by governments on the value including freight and insurance of imported products. Different tariffs applied on different products by different countries.
When a nation has the ability to produce a specific product more efficiently than any other nation?absolute advantage, economic concept that is used to refer to a party's superior production capability. Specifically, it refers to the ability to produce a certain good or service at lower cost (i.e., more efficiently) than another party.
Is the exportation of large quantities of a product at a price lower than that of the same product in the whole market?Dumping occurs when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market. The biggest advantage of dumping is the ability to flood a market with product prices that are often considered unfair.
Is the ability to produce a specific product?Comparative advantage is the ability to produce a specific product more efficiently than any other nation. Purchasing raw materials or products in other nations and bringing them into one's own country is known as importing.
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A complete halt to trading with a particular nation or in a particular product is called a(n)
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