Managerial Economics - Essay Example

? Managerial Economics Essay AFFILIATION: Managerial Economics Essay One of the best articles that have discussed the importance of International Trade in World Market has been published in New York Times magazine which has highlighted the importance of trade agreements in this globalization period (International Trade, 2012). The trade agreements have reduced prices of goods and services of America in foreign markets and also in the home country; tariffs and taxes on these products have been eliminated to a considerable extent. Overall benefits because of globalization are numerous but the major one is surging demand of products and services along with reduction in their prices. As a result of globalization and trade agreements, foreign goods are available at cheaper prices and more American workers are losing their job as labor cost is rising at an accelerating pace. Globalization Globalization has helped in easing up trade between countries as it allows exchange of information, products, resources, services and markets at international level and gives organizations the opportunity of interacting with markets present in different countries. According to globalization theory, cited by Rogers and Hyatt (2012), there are about six processes of globalization that are dynamic and interdependent such as: 1. Increase in economic dependence across the world 2. Dramatic rise in exchange among countries on cultural, economical and resources level. 3. Breakthrough innovations in technological field allow quick access to important and new ideas and information. 4. Space and time has been compressed. 5. Institutions and events have been disembodied that allow restructuring and realignment of interaction on social level across time and space. 6. Reflexive processes have increased global consciousness. Hence, government policy makers have to take into account the factors that are impacting globalization as it has become an important part of every economy. In addition, many governments have changed their policies to support Foreign Direct Investments within their countries so that economy gets boosted (Castle, 2012). Trade Agreements – Protectionism or Deregulation Trade Agreements are being done on an increasing rate among countries to cope up with the recession that has significantly impacted their economies. According to some researchers, Trade Agreements have helped in taking advantages of benefits being offered to each party; on the other hand, some critiques have argued that it poses threat to local manufactures and service providers (Shah, 2010). In economic policy, protectionism is used to create some restrain in trade through various measures like regulations, quotas and tariffs; it is used in discouraging certain goods imports and give protection to domestic markets as well. On the other hand, deregulation is done to have free economic activity that is free from binding rules of the state; the main idea of this attempt is to boost competition in the country (Labonte, 2010). Some critics have referred to protectionism as a barrier to free trade as it makes certain industries eligible for subsidization that means competition reduces to a greater extent as everyone is treated on an equal basis. However, deregulation allows easy trading amongst countries and motivates domestic producers to contribute more in its respective economy. Inflation Inflation is described as increase in price of goods and services (Amadeo, 2012). When inflation is increased, individual’s standard of living falls considerably; each dollar spent for purchasing will buy less amount of thing being bought and more money will be required to get hold of same goods and services. When the inflation is mild, it can significantly impact the economic growth of a country. Healthy economy is one in which prices rise slowly and gradually so that future increase in prices can be avoided. All government policies have to ensure that inflation is controlled so that prices of goods and services are within affordable range of every consumer. Impact of government policy on goods and services In America, trade agreements have helped in reducing the goods and services produced in the country both within America and in foreign markets. United States of America has Free Trade Agreements with seventeen countries including Canada and Mexico (International Trade, 2012). Consumers have benefited a lot by taking advantage of easy availability of reasonably priced goods. In 2011, three free trade agreements with Colombia, South Korea and Panama were passed by Congress that ended political problems that were present in between these countries. With the help of these trade deals both political stability has been achieved with robust growth in country’s economy (Labonte, 2010). When trade agreements are signed, there are certain level of impacts on goods and services as they vary according to country’s culture, consumer’s taste and preferences for certain products and services and price consciousness along with other factors. Whenever any country will go ahead with trade agreement, it will provide vast variety of options to the consumers as there will be abundant supply of locally produced products and services and foreign goods as well. Likewise, since the prices will be competitive, the demand of these products will increase; although both supply and demand curves will shift to right and the change in prices and quantity will be depicted accordingly. As a result of these trade agreements, the demand and supply of American goods has increased, price has not been impacted drastically. The impact of the trade agreements has been shown in the figure below: Hence, in order to make successful progression across world so that globalization advantages can be enjoyed, it is important to understand that industrialization in a country can be successful on after careful steps are taken; it is a cumulative process that involves movements from one stage to other by establishing new industries that have high value added and innovative contents of technology. For economic development, production along with exports need to be decided appropriately in its earlier stages and they should comprise of primary commodities while imports should include manufacturers of both labor and capital intensive products. When exporting is done at this stage, there is a huge chance of increasing exports as unemployed resources are utilized fully. Therefore, countries need to identify their potentials, talents and resources that can give them competitive edge in the market. Hence, the government needs to design the policies in accordance with the requirement of its economy so that it can take initiatives of making appropriate progression for its economy; policies should be actively designed for promotion and support of friendly work and business environment so that competition is healthy so that it allows development of appropriate industries which can boost the country’s economy. References Amadeo, K. (2012, April 18). What is Inflation? US Economy.com. Retrieved September 18, 2012 from http://useconomy.about.com/od/pricing/f/Inflation.htm Castle, S. (2012, September 13). O.E.C.D. Finds New Signs of Weakness in World Economy. New York Times. Retrieved September 18, 2012 from http://www.nytimes.com/2012/09/14/business/global/oecd-finds-new-signs-of-weakening-in-global-economy.html?ref=internationaltradeandworldmarket International Trade (2012, September 17). International Trade and World Market (Trade Disputes). New York Times. Retrieved September 18, 2012 from http://topics.nytimes.com/top/reference/timestopics/subjects/i/international_trade_and_world_market/index.html Labonte, M. (2010). The size and role of Government: Economic issues. Retrieved September 18, 2012 from http://www.fas.org/sgp/crs/misc/RL32162.pdf Rogers, C., & Hyatt, J. (2012, September 1). Looking for growth in all the same places. CFO Magazine. Retrieved September 18, 2012 from http://www.cfo.com/article.cfm/14658885 Shah, A. (2010, January 17). Deregulation or Protectionism. Globalissues.org. Retrieved September 18, 2012 from http://www.globalissues.org/article/43/deregulation-or-protectionism Read More