Trade | A-Level Economics Notes
These revision notes cover everything you need to know about Trade for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.
What is free trade?
Free trade is the act of trading goods and services without protectionist measures.
What is protectionism?
Protectionism are barriers that restrict trade.
What is a tariff?
A tariff is a tax on imports.
What is the tariff diagram?
What is a quota?
A quota is a physical limit on the quantity of imports
What is an export subsidy?
Subsidies are payments given to domestic producers to allow them to reduce their costs of production. This should make the country’s products more internationally competitive.
What is a free trade area?
A free trade area is an agreement between countries to trade without any protectionist measures.
What is a customs union?
A customs union is an agreement where members agree to trade without any protectionist measures, as well as impose a common external tariff (a tariff on non-members).
What is a common market?
A common market is the same as a customs union, but there is also free movement of factors of production (including workers).
What is a currency union?
A currence union is an agreement for members to share the same currency. This means they must share the same central bank and same interest rates.
What are two advantages of free trade?
Two main advantages of free trade are:
- lower prices
- higher productivity due to specialisation
What are two disadvantages of free trade?
Two main disadvantages of free trade are:
- structural unemployment
- over-dependence and vulnerability to economic shocks
What are two advantages of protectionism?
Two main advantages of protectionism are:
- growth of domestic industries
- less vulnerable to economic shocks
What are two disadvantages of protectionism?
Two main disadvantages of protectionism are:
- higher prices
- low productivity due to lack of specialisation
Summary questions
- What is free trade?
- What is protectionism?
- What is a tariff?
- What is the tariff diagram?
- What is a quota?
- What is an export subsidy?
- What is a free trade area?
- What is a customs union?
- What is a common market?
- What is a currency union?
- What are two advantages of free trade?
- What are two disadvantages of free trade?
- What are two advantages of protectionism?
- What are two disadvantages of protectionism?
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