StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Global Economics: Trade, Cost and Pricing - Essay Example

Cite this document
Summary
The US tobacco Companies will subsidize farmers so as to get cheap supply of raw materials from these countries. This is also evident in that in developing countries labour intensive forms of production are cheap. In this developing countries labour is cheap, therefore developed countries prefer to get their raw materials whose production is labour intensive from the developing countries.
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER93.3% of users find it useful
Global Economics: Trade, Cost and Pricing
Read Text Preview

Extract of sample "Global Economics: Trade, Cost and Pricing"

Global Economics: Trade, Cost and Pricing The US tobacco Companies will subsidize farmers so as to get cheap supply of raw materials from these countries. This is also evident in that in developing countries labour intensive forms of production are cheap. In this developing countries labour is cheap, therefore developed countries prefer to get their raw materials whose production is labour intensive from the developing countries.Therefore, the US tobacco companies will subsidize tobacco farmers in developing countries in order to tap the comparative advantage.

David Ricardo came up with the theory of comparative advantage that can be defined as the ability of a country to produce a specific good at a lower opportunity cost than its trading partners.In the shorten tobacco farming in developing countries will be profitable, however, in the long run this may not be the case, this is because more farmers will engage in tobacco farming, and when this happens the supply of tobacco goes up beyond the demand for it and the price of tobacco will go down this well cause a loss to the farmers.Effects2. In the long run price of tobacco will down where the supply increases.

For the food items, the supply will be low and the prices will be high. This is explained by the fact that farmers will concentrate on tobacco production and abandon food products. This will cause a shortage of food items therefore, their price rises.Internationally, food prices will rise because the developing countries are the major sources of food products for international trade. This is due to shortages in the international markets.3. The following are the reasons why multinational companies invest in other countries;1.

To gain control over the supplies of raw materials found in abundance in particular locations.2. Cost advantage. If it's more cost effective to produce in particular area.(a) If it's cost effective to supply a local market with local production.(b) Low cost of labour.3. As a defensive measure- If its market share is threatened by the entry of a local firm 4. Trade barriers- So as to avoid trade barriers they set up facilities in foreign countries. Therefore, in our case where Acme motors produce only the engines in Nuevo Lavedo is because they will avoid trade barriers during transportation of their parts to other branches and this reduces the final cost of production.

It might also may be cheap to produce engines in Nuevo-Laredo than any other branch and this help reduce the cost of the final product.4. Acme motors would shift its product of engines from Detroit to Mexico and then shift the engines to the US.Import duties for goods from Detroit to the US are high than the import duty imposed on goods from Mexico. Therefore the company takes advantage by importing the goods from Mexico. This reduces the cost of the final product.5. Consumer gains and losses in this type of international production.

Consumer GainsDue to the fact that the companies produce at low cost and that they are competing with other firms, we expect that the companies will reduce prices. As a result the consumer's real income increases.Multinationals companies increase efficiency and flexibility of the World economy by making resource use. This will as a result increase the availability of various goods in a country thereby increasing consumer goods variety.LossesThe multinational companies may decide on prices of these goods and may exploit the consumers by charging high prices.

ReferencesHardwick P, Khan B, Langmead J, (1997), An Introduction to Modern Economics, Fourth Edition, New York, Longman Group UK Limited, Kenen, P. B (1994); The International Economy, 3rd Edition, New York, Cambridge University PressKirkaldy, A. W. (1929); The Romance of Trade, 2nd Edition, Britain, Devonshire Press, Torquay, Schiller, B. R. (1980); The Macro Economy Today, 7th Edition, New York, Von Hoffman Press

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Global Economics: Trade, Cost and Pricing Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Global Economics: Trade, Cost and Pricing Essay Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/miscellaneous/1520262-global-economics-trade-cost-and-pricing
(Global Economics: Trade, Cost and Pricing Essay Example | Topics and Well Written Essays - 500 Words)
Global Economics: Trade, Cost and Pricing Essay Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/miscellaneous/1520262-global-economics-trade-cost-and-pricing.
“Global Economics: Trade, Cost and Pricing Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1520262-global-economics-trade-cost-and-pricing.
  • Cited: 0 times

CHECK THESE SAMPLES OF Global Economics: Trade, Cost and Pricing

Advantages and Disadvantages of Using Emissions Permit System

Whether not available for now, legal, binding pricing mechanism on the use of traditional fossil fuels seems all but inevitable in the 21st century.... Nevertheless, pricing carbon emissions remain in dispute among policymakers and academics voicing backing to the old command controls.... mission trading permits with a pricing scheme on carbon usually strives to achieve two interrelated but beneficial ends: discouraging— with increasingly inhibitive economic costs — the use of traditional sources of energy such as oil, natural gas and coal, to inspire the development of innovative renewable sources of energy that are less costly to the environment (Wills, 2006)....
5 Pages (1250 words) Essay

Economics for Business

Advertisements, pricing strategy, and superior quality of goods and services are popular approaches for the generation of the potential customer base.... The author of this assignment "economics for Business" casts light on financial issues in business.... As the text has it, the micro-economic environment is important for business organizations for it advocates the adoption of various means to reduce problems related to scarcity....
6 Pages (1500 words) Assignment

The Future of the Bulk Shipping Market in the Next Three Years in 2012-2015

cost reduction is considered to have a big share in revolutionalising the shipping industry.... However, there are many factors attached to cost reduction and which can plays a role in enhancing cost reduction (Madura 2006).... Shipping industry plays a major role in global trade given that it contribute two thirds of the worlds goods transported to different destinations (Branch 2007).... Some of the issues to investigate and assess their implications as far as the future trends are concerned include and not limited to, capacity, trade, and port facilities....
14 Pages (3500 words) Essay

Using Economic Theories to Analysis Apples Strategy

However, the organization experiences huge scale and scope of trade and recruits over 80000 skilled workforce around the world.... Apart from the theories of strategic management and marketing,… economics is the study of consumption and production of goods and services.... For making the analysis, the researcher will use theories of economics such as, that of demand and supply, consumer behaviour, absolute advantage, rational choice and market structure (Hutt and Speh, 2013)....
10 Pages (2500 words) Essay

Limits to the Economic Integration

This paper analyzes and explains the main theme by considering the North American Free trade Agreement.... hellip; On August 12, 1992, the United States, Mexico, and Canada announced to form a free trade zone which was named as the North American Free trade Agreement.... NAFTA is known as the largest trilateral relationship of trade throughout the world.... The amalgamation of economic policies among various states through the full or partial elimination of tariff and non-tariff restraints on trade that take place among them before their integration is known as Economic integration....
8 Pages (2000 words) Term Paper

Potential Benefits of International Trade

The paper "Potential Benefits of International trade" states that it's universally a benefit for various countries to indulge in this most common trade in today's world.... What nations need to put into account is basically their comparative advantage so as to fit the balance of trade in their favour.... hellip; Global trade leaders had vowed to uphold free trade principles and rid of themselves the trade protectionism at a summit held in Washington....
6 Pages (1500 words) Coursework

Free Trade as the Primary Force Driving Economic Development

Free trade is the primary force driving economic development as countries import and export merchandise that can be developed at more cost-efficient rates, therefore, promoting innovation, global competitiveness, increasing profits and suppressing prices that consumers pay.... No one country can develop all goods/services in the most cost-efficient manner, therefore free trade allows for other countries to develop goods/services at better quality and cheaper cost....
10 Pages (2500 words) Essay

The Benefits of Road Transport

nvironmental damage that is local in nature is easier to cost and to control than issues which call for global action.... All national governments may not be equally focused or diligent in this respect, especially in emerging nations with high priorities for economic growth, but at least Environmental economics has sound measures for compensating communities affected by new roads, if people would like to use them....
9 Pages (2250 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us