Multinational Corporate Strategies

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Natural Resources

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Multinational Corporate Strategies

Definition

Natural resources are raw materials and components that are found in nature and can be utilized for economic gain. These resources are essential for the production of goods and services, including minerals, forests, water, and fossil fuels, and they form the basis of many industries. Their availability and distribution play a critical role in determining a country's economic performance and influence in global trade.

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5 Must Know Facts For Your Next Test

  1. Natural resources can be categorized into renewable and non-renewable types based on their availability and replenishment rate.
  2. The accessibility of natural resources often shapes a country's industrial base and its international trade relationships.
  3. Countries rich in natural resources can sometimes become overly reliant on them, leading to economic vulnerabilities if resource prices fluctuate.
  4. Sustainable management of natural resources is crucial for ensuring long-term economic viability and environmental health.
  5. Geographic location and climate conditions significantly impact the types of natural resources available in different regions.

Review Questions

  • How do natural resources influence a country's comparative advantage in international trade?
    • Natural resources directly impact a country's comparative advantage by providing it with unique raw materials that may not be readily available elsewhere. Countries rich in specific resources can produce goods more efficiently than those lacking those resources. This ability to produce certain products at a lower opportunity cost allows these nations to specialize and trade effectively, thus enhancing their position in global markets.
  • Evaluate the potential risks associated with a country heavily dependent on its natural resources for economic stability.
    • Dependence on natural resources can expose a country to significant economic risks, such as price volatility in global markets which can lead to boom-and-bust cycles. Additionally, reliance on a narrow range of exports may stifle diversification in the economy, making it vulnerable to external shocks. Furthermore, this dependency can lead to environmental degradation and social issues if resource management is not conducted sustainably.
  • Assess how the management of natural resources can affect sustainable development goals in different countries.
    • The management of natural resources plays a crucial role in achieving sustainable development goals by determining how effectively these resources contribute to economic growth while preserving the environment. Countries that adopt sustainable practices tend to experience balanced growth that respects ecological limits, fostering long-term prosperity. Conversely, mismanagement can lead to resource depletion and social conflict, undermining efforts toward equity and sustainability, which are central to global development agendas.
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