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== Week 37 - Modern trade theories, trade policy == * '''Vernon's [[w:Product life-cycle theory|Product life-cycle theory]]''' is an economic theory that was developed by Raymond Vernon in response to the failure of the [[w:Heckscher-Ohlin model|Heckscher-Ohlin model]] to explain the observed pattern of [[w:international trade|international trade]]. The theory suggests that early in a product's life-cycle all the parts and labor associated with that product come from the area in which it was invented. After the product becomes adopted and used in the world markets, production gradually moves away from the point of origin. ( Wikipedia ) * '''[[w:Economies of scope|Economies of scope]]''' are conceptually similar to [[w:economies of scale|economies of scale]]. Whereas economies of scale for a firm primarily refers to reductions in the [[w:average cost|average cost]] (cost per unit) associated with increasing the scale of production for a ''single product type'', economies of scope refers to lowering the [[w:average cost|average cost]] for a firm in producing ''two or more'' products. * In economics, '''[[w:internalization#Economics and management|internalization]]''' can refer to the practice of multinational enterprises (MNEs) to execute transactions within their organization rather than relying on an outside market. ( Wikipedia ) * The '''[[w:eclectic paradigm|eclectic paradigm]]''' is a theory in economics and is also known as the '''OLI-Model''' or '''OLI-Framework'''. It is a further development of the theory of internalization and published by John H. Dunning in 1980. ( Wikipedia ) === Export based methods === '''indirect [[w:export]]ing''' is done by :#) An '''export house''' buys products from a domestic firm and sells them abroad on its own account ( teacher ) :#) A '''[[w:confirming house]]''' is a specialised UK agency that purchases and arranges the [[w:export]] of goods on the behalf of overseas buyers. They finance the movement of goods into the country by offering short-term credit to importers and guaranteeing, or confirming, payment to the suppliers in the suppliers own domestic currency. The confirming house usually negotiates the price with the suppliers, ships, insures and provides information on the goods on the overseas buyers behalf. ( Wikipedia ) :#) A '''buying house''' performs similar functions to those of the confirming house but is more active in seeking out sellers to match the buyerโs particular needs ( teacher ) In '''direct exporting''' a firm is distributing and selling its own products to the foreign market '''Non-equity methods''' :A firm sells [[w:technology|technology]] or [[w:know-how|know-how]] under some form of [[w:contract|contract]], often involving [[w:patent|patent]]s, [[w:trademark|trademark]]s and [[w:copyright|copyright]]s ([[w:intellectual property rights|intellectual property rights]]) ( teacher ) :#) '''[[w:licensing|licensing]]''' :#) '''[[w:franchising|franchising]]''' :#) '''[[w:management|management]] [[w:contracting|contracting]]''' :#) '''technical service agreements''' :#) '''[[w:strategic alliance|strategic alliance]]s''' === Trade policy === {{Q|A '''[[w:commercial policy|commercial policy]]''' (also referred to as a '''trade policy''' or '''international trade policy''') is a set of rules and regulations that are intended to change international [[w:trade flows|trade flows]], particularly to restrict [[w:imports|imports]].|Wikipedia|[[w:trade policy|trade policy]]}} * Various instruments of '''[[w:trade policy|trade policy]]''': including '''[[w:tariff|tariff]]s, [[w:quota|quota]]s, [[w:export subsidies|export subsidies]], [[w:voluntary export restraints|voluntary export restraints]] and local content requirements'''. * The effects of these policies on [[w:price|price]]s and [[w:trade|trade]] [[w:Volume (finance)|volume]]s * [[w:Consumer|Consumer]] and [[w:producer|producer]] [[w:surplus|surplus]]: [[w:welfare|welfare]] effects of various [[w:protectionist|protectionist]] measures * The '''[[w:political economy|political economy]]''' of '''[[w:trade theory|trade theory]]''': why certain restrictions exist * [[w:Optimum|Optimum]] [[w:tariff|tariff]]: countries can improve their terms of trade and their [[w:national|national]] [[w:welfare|welfare]] * If '''[[w:labor market|labor market]]''' is not functioning properly ([[w:market failure|market failure]]), the theory of [[w:second best|second best]], [[w:marginal benefit|marginal social benefit]] - considerations of [[w:income distribution|income distribution]] * '''[[w:GATT|GATT]], [[w:WTO|WTO]], [[w:customs union|customs union]], [[w:free trade area|free trade area]]s'''
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