Suggested Answers of BT2 Revision Package - ASKnLearn

2010 IJC Prelim 2010 H2 Paper Q6(a) Explain how immobility of factors of production can affect trade between countries.[10](b)(c) Assess the extent to which supply factors, rather than demand factors, are the majordeterminants of trade patterns between Singapore and the rest of the world.[15]Suggested Answer Scheme:(a) Explain how immobility of factors of production can affect trade betweencountries. [10]IntroductionImmobility of factors of production à factors of production are not able to move from oneuse to another, one industry to another or from one location to another with easeImmobility of factors of production might affect willingness of countries to trade as it affectthe gains from trade1. Immobility of factors of production between countriesTheory of Comparative Advantage is premised on factors of production being immobilebetween nationsExplanation of theory illustrating how countries can gain from specialization and trade asthere are differences in opportunity cost between countries if factors are immobile2. Immobility of factors of production within a countriesTheory of Comparative Advantage assumes that there is mobility of factors of productionbetween industries to facilitate specialisation by countries in areas which they have acomparative advantage inImmobility of factors of production implies comparative advantage that countries possess arenot translated into gains from trade, or the gains are significantly diminished