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The table below shows the production of machinery and clothes in China and India - Leaving Cert Economics - Question 5 - 2006
Question 5
The table below shows the production of machinery and clothes in China and India. While China is more efficient in the production of both goods it will still benefit... show full transcript
Worked Solution & Example Answer:The table below shows the production of machinery and clothes in China and India - Leaving Cert Economics - Question 5 - 2006
Step 1
Explain why China should concentrate on the production of clothes and India should concentrate on the production of machinery.
Answer
China is more efficient in the production of clothes compared to India, meaning it can produce more clothes per worker per hour. In contrast, India is relatively more efficient in producing machinery, even though it is less efficient than China overall. By specializing, China can maximize its production of clothes, while India can focus on machinery, ultimately benefiting both countries from trade.
Step 2
Name the Economic Law which applies to the table above.
Answer
The Economic Law that applies is the Law of Comparative Advantage. This law suggests that even if one country is more efficient in all areas of production, there are still advantages to specializing in the production of goods where they have the least opportunity cost.
Step 3
Calculate the resulting total output if specialisation takes place. Show your workings.
Answer
If specialisation occurs:
- India will produce only machinery, generating:
- China will produce only clothes, generating:
Thus, the total output after specialisation will be:
Total Output = Machinery (10 units) + Clothes (40 units) = 50 units.
Step 4
State and explain THREE reasons why imports are important to the Irish economy.
Answer
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More choice for consumers / Higher standard of living: Imports increase the availability of goods, allowing consumers to choose from a wider variety of products and services, ultimately enhancing the quality of life.
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Raw materials unavailable in Ireland: Some raw materials are not produced in Ireland, and imports are necessary to ensure that industries can maintain production.
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Jobs in distribution sector: The importation of goods creates jobs in the distribution and logistics sector as products need to be transported and sold in domestic markets.
Step 5
State TWO other examples of invisible imports.
Answer
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Irish people using foreign financial services: When Irish individuals utilize services such as banking or insurance from foreign providers, it counts as an invisible import.
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Foreign rock groups performing in Ireland: When international artists perform in Ireland, the revenue generated is an example of an invisible import as these services are not produced domestically.
Step 6
State and explain TWO reasons why a government would want to restrict imports.
Answer
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Protect infant industries: A government might restrict imports to give emerging industries time to grow without facing competition from established foreign firms.
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Protect domestic employment: By limiting imports, the government helps protect jobs in local industries that might otherwise be threatened by cheaper foreign competition.
Step 7
State and explain TWO methods a government may use to restrict imports.
Answer
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Tariffs: Imposing tariffs on imported goods raises their prices, making locally made products more competitive.
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Quotas: Setting limits on the quantity of goods that can be imported helps maintain market stability and protect local industries from being overwhelmed by foreign products.