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Economic Growth in China and India - Case Study Example

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The paper "Economic Growth in China and India" is a perfect example of a macro & microeconomics case study. Safety with regard to carrying out online transactions as the strengthening the method through which online transactions take place has reduced the chances of misuse of funds and provided an opportunity through which the different users are able to ensure the safety of funds (Shopping, 2013)…
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1. The change in consumer preference towards the use of technology to purchase their products is due to the different benefits which a consumer gets. This has shifted the mind set of the consumers towards the use of internet while looking to purchase the product. The different reasons which can be attributed to the same is as Safety with regard to carrying out the online transactions as strengthening of the method through which online transaction takes place has reduced the chances of misuse of funds and provided an opportunity through which the different users are able to ensure safety of funds (Shopping, 2013). This has thereby improved the demand elasticity of internet shopping as safety has ensured that more and more people are able to purchase the product. The opportunity to use different forms of payment method provides an opportunity to the customers to carry out the transactions effectively (Shopping, 2013) The low transaction cost which internet involves makes customer purchase the same from the internet. The low transaction cost includes the cost of convenience as it provides an opportunity for the customer to purchase the same from the comfort of the home and need not travel to the traditional stores to purchase the product (Shopping, 2013) The internet model also helps the consumer to gather more information about the products and services in comparison to the information that can be gathered through traditional methods. Since, using the traditional method will ensure that the customer will look at the price by visisting one or two store but internet provides an opportunity where all information can be gathered easily and quickly thereby ensuring easy avaliability of information (Shopping, 2013) Internet shopping has also developed due to the growth in the social networking site which creates awareness and provides an opportunity to the different customers to understand the product better. This has thereby guided the customer to purchase the product accordingly as it has provided the required knowledge based on which purchase decisions are made (Shopping, 2013) The possibility of purchasing products online through a number of devices like mobile handset, desktop, laptop and others has multiplies the opportunity and ensures that customers can carry out the role of purchasing the product or services from any place (Shopping, 2013) The development of pop up stores by the different online players which allows customers to inspect the product before purchasing the product has multiplied the effect of online shopping. Since, customers are able to inspect the product and based on it the purchasing decision is made it has enabled the online stores to function as a traditional store while still retaining the benefits of internet shopping and has attracted customers towards their products and services (Shopping, 2013) Internet shopping has thereby affected the established shops in Australia as the increase in the customer base towards online shopping has reduced the number of customers visiting the traditional shops. When we look at the supply and demand perspective from the growth in internet shopping it looks as follows The above graph clearly highlights that both the demand and supply has increased in case of internet shopping which has thereby increased both the equilibrium price and quantity and has affected the entire business that takes place through the internet medium. The above graph also shows that when the increase in supply is less than the increase in demand then the equilibrium quantity rises from Eq1 to Eq2 and the equilibrium price rises from Ep1 to Ep2 (Garg, 2010). In this case the price increase is more than the increase in quantity. Since, internet provides an opportunity where customers can compare prices and choose the most correct one it results in the following The above graph shows that the internet revolution has resulted in a shift in quantity demanded where the quantity demanded has grown considerably whereas the increase in price is not substantial due to competition and low transaction cost. This has resulted in the increase in supply is more than the increase in demand then the equilibrium quantity rises from Eq1 to Eq2 and the equilibrium price rises from Ep1 to Ep2 (Garg, 2010). A change on the other hand is witnessed in case of traditional shows in Australia which is as The traditional market on the hand ha witnessed the opposite as both the demand and supply has decreased. The fall in demand is due to shift in customers towards internet shopping. This has forced some of the retail stores to close or shift to online method of conducting business. This has thereby affected the traditional business as when the decrease in supply is more than the decrease in demand then the equilibrium quantity falls from Eq1 to Eq2 and the equilibrium price rises from Ep1 to Ep2 (Garg, 2010). This has thereby affected the traditional method of selling products through stores and increased the business taking place through online transaction. 2. a. The world economies have witnessed widespread changes in the manner international trade is done between countries. The world is witnessing increasing trade relations not only with developing countries with developed countries but also an increase and change in trade as more and more trade is seemed to occur between developing countries or between developed countries (Colell, Winston, Michael & Jerry, 2005). The manner and process which has transformed the overall style of working has helped to build further relations and provides an important direction through which the world economies have undergone changes. Below is the statistical data for developing countries like China & India (OECD, 2013) A look at the statistical figures for China & India shows that both the countries have been involved both in exports and imports highlighting that the economies are looking to work on the concept of competitive advantage and look to purchase products or services from other places which is cheaper. An analysis of China shows that its exports and import contribution is nearly the same which highlights the growing inter-relationship which exist between the other countries. This also brings an important point that as the economy starts to grow and become more developed it starts to look towards gaining competitive advantage. This results in increased trade from economies which are advanced and have the necessary edge (Colell, Winston, Michael & Jerry, 2005). This doesn’t not necessarily mean that trade will be will be within developing and developed countries but trade can also take place between developed countries or between developing countries. This thereby highlights that south-south trade which was not present in the early decade have started to gain prominence and has resulted in increased business opportunities. A look at the statistical figures for India shows that the amount of import is more that export which should be the underlying point for a developing economy. This shows that India also looks to gain from competitive advantage and engages in trade relations with all countries. It is further analyzed that the degree of dependence is higher from developed countries as most of the international trade depends on developed countries. This signifies the fact that India is dependent on developed countries for their international trade. Trade do take place between India and less developed countries but the volume and magnitude of impact is limited. This substantiates that the degree of dependence in case of India is high on developed countries showing the presence of North-South trade being prominent in case of developing countries. A look at the statistical figure for Australia as shown below shows (OECD, 2013) The statistics for Australia shows that Australia imports more goods and services that the exports resulting in a negative Balance of Payment. This highlights that the country has looked towards supplying the world with products and services where they are market leaders and rely on China and other developing countries for the different import products and services which the country needs. This has thereby ensured that Australia looks to work on the concept of both North-South trade and South-South trade signifying the fact that trade relation in Australia has grown in all directions. This results in increased trade from economies which are advanced and have the necessary edge. This doesn’t not necessarily mean that trade will be will be within developing and developed countries but trade can also take place between developed countries or between developing countries. This has thereby ensured that the volume of trade grows and has provided the required push through which better relations have been established. A further look at the statistics for United States shows the following (OECD, 2013) The analysis of the data for United States shows that the country has imported more products and services than exported. This has made the balance of payment to be negative. The analysis also shows that United States international trade has been accounted both by developing and developed countries. This shows that the economy has looked to work on the fundamentals which helps to strengthen their style of working and provides the required structure through which the economy is able to gain. This has thereby ensured that United States looks to work on the concept of both North-South trade and South-South trade signifying the fact that trade relation in Australia has grown in all directions. This results in increased trade from economies which are advanced and have the necessary edge. This will help to give the required push to the economy and provide the framework for future growth. A further look at the import and export relation between the countries is as (OECD, 2013) The above chart clearly highlights that the manner in which the world economies have undergone changes has increased the nature of trade that takes place between developed and developing economies. The overall change has been so strong that it has resulted in transforming the nature of business and has increased the south-south trade which corresponds to increase trade relations between developed economies and developing economies. This has been supported by the growth and changes that the economy is witnessing as trade between developing and developed countries has also grown. The overall effect has been such that the volume of international trade has increased considerably. The different statistical figures also show that there has been a growth in south-south trade and the increase in trade comes from all quarters. For example the increase in population of developing and poor countries has ensured that the cost of production of goods or services is low. This has even influenced the other developing countries to outsource their work to the developing countries. This has thereby ensured that the developing countries are able to trade with all countries (Colell, Winston, Michael & Jerry, 2005). Similarly, the developed countries have looked to specialize on their core activities and products where they have advantage. They look to produce those services and products and outsource the others to other developed countries. This has thereby helped them to undergo relation with developed countries as well and has increased the volume of trade that takes place with developed countries. The overall process thereby highlights changes in international trade and has seen an increase in south-south trade which has thereby increased the volume of trade and has provided the extra benefit as economies have relied on the concept of competitive and comparative advantage which has helped to develop their economies. This has helped to develop the international trade which is taking place between nations and has provided the required impetus and framework which will further help to ensure that all economies are able to gain from international trade. 2. b. The analysis shows that business trade relations has developed as the volume of trade has grown both between developed nations and developing nations. This is because of the theory of competitive advantage which helps to understand the manner in which economies have gained. Economies look to develop trade relations between both developing and developed nations based on the competitive advantage that the economy has. For example poor and developing countries which have a huge population base like India is witnessing the availability of cheap labor. This has provided them a competitive advantage over other developed countries with regard to cost. This has thereby made economies outsource some of the activities like BPO to India and has thereby developed trade relations between the countries. On the other hand the concept of complete advantage is also seen as some developed economies have highlighted complete advantage over others. This has thereby made developing countries purchase the required product or services from the developed countries as they are the most competitive and the price at which they provide cannot be done by other economies. This has been backed by the fact that the growth in international business has been possible due to relation of laws and opening up of economies which has facilitated trade. The growth in the business over the year is also due to the fact that different economies are looking to find out alternatives which will ensure that the product or services is supplied continuously and has provided the required direction through which both the economies gain. This has been aided by the fact that certain economy has an advantage over the production of something whereas the other economy has over another (Farmer, 2009). To maintain equilibrium and to ensure that all the products and services are available it has helped to bring the change in the international business and has developed the required dimension which has helped economies to gain. The volume of international trade has further highlighted that the business looks to carry out trade both with developed and developing economies which has thereby ensured that the overall process of developing the business helps to determine the manner in which the business has grown and has helped to multiply the volume of trade between economies. The growth in the volume of business between developed and developing countries and between developed and developed countries can also be stated due to different factors. Firstly, the relations of rules regarding import and export and the opening up of economies has helped to ensure that economies look to find out destinations which will help to improve their business. Secondly, the development of better technology has enabled better communication and passing information which has thereby helped to understand the requirements of another economy (Farmer, 2009). Based on the competitive advantage the economies have tried to develop their resources which has thereby provided an opportunity through which trade relations has developed and ensured the availability of all type and products all around the globe. Thirdly, the development of better diplomatic ties has helped to simplify the process of carrying out business and has helped to develop the required parameters which have ensured that the overall effectiveness is gained. The growth in the business over the year is also due to the fact that different economies are looking to find out alternatives which will ensure that the product or services is supplied continuously and has provided the required direction through which both the economies gain. This has been aided by the fact that certain economy has an advantage over the production of something whereas the other economy has over another (Farmer, 2009). To maintain equilibrium and to ensure that all the products and services are available it has helped to bring the change in the international business and has developed the required dimension which has helped economies to gain. This has thereby developed international business and has ensured that people all around the globe are able to gain. This has helped to ensure that international business improves and have been aided by different factors which have provided the required change in carrying out business. References Colell, M., Winston, A., Michael, D. & Jerry, R. 1995. Microeconomic Theory. 3r Edition, New York, Oxford University Press, Pearson Education Farmer, R. E. A. 2009. The Macroeconomics of Self-Fulfilling Prophecies, 2nd edn, Cambridge, MA:MIT Press. Garg, S. 2010. Microeconomics: Introductory. 7th edition, pp 3.11-9.17, Dhanpat Rai Publication OECD. 2013. OECD. Retrieved on May 3, 2013 from http://www.oecd.org/statistics/ Shopping. 2013. Shopping Becomes a Net gain. Retrieved on May 3, 2013 from http://education.theage.com.au/cmspage.php?intid=152&intversion=32 Read More
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