Can you please give me 2 questions based on this topic which I can asked during
ID: 359189 • Letter: C
Question
Can you please give me 2 questions based on this topic which I can asked during the presentation.
Lower Consumer Prices with Imports
Case Study 2-3
Overview of Imports
u Imports allow countries to offer more competitive pricing through lowering
the price point and increasing the choices and ranges of products available to
consumers and end users.
u Complete free trade would lower prices, but economies must protect
domestic producers, and therefore implement trade restrictions and
regulations.
u Imports are also very crucial, because many nations cannot produce certain
products – especially in agricultural related areas.
The Basics
u Imports have been a vital economic factor for the U.S. and other global
economies for decades in allowing consumers to gain more favorable pricing
in areas such as:
u Agricultural Crops
u Technology
u Commodities (i.e. copper and other precious metals)
u Alcoholic Beverages (wine, beer, etc.)
u Clothing and Textiles
Market Equilibrium
u Equilibrium price of a commodity: The price at which the quantity
demanded of the commodity equals the quantity supplied and the market
clears.
u Example: 5 million iPhones a year are demanded and 5 million iPhones are
produced. This insures there is nether a surplus on supply nor a shortage.
u This can also be called the “market clearing price.”
Market Schedules
Supply and Demand Shifts
u An increase in demand (a rightward shift in the demand curve) results in an
increase of both the equilibrium price and quantity of the commodity. A
decrease in demand has the opposite effect
u An increase in supply (a rightward shift in the demand curve) results in a
lower equilibrium price, but a higher equilibrium quantity. A decrease in
supply has the opposite effect
Why Companies and Governments Favor
Imports
u Better labor rates resulting in lower price
u Better efficiencies in foreign markets resulting in lower price
u Lower overhead resulting in lower price
u Favorable exchange rate resulting in lower price
u LOWER PRICE FOR PRODUCT MATERIALS AND ASSEMBLY RESULTS IN LOWER
PRICE FOR END USER OR CONSUMER
The Downside of Imports
u Depression of jobs in National Economy
u Protecting jobs by restricting trade is very expensive and inefficient because it
would keep the nation in the production of goods and services that the nation can
only produce less efficiently and at a higher cost than foreign producers (otherwise
the protected industries would not need the protection in the first place).
Imports Play Major Role in Political
Campaigns
u In Donald Trump’s Presidential “Make America Great Again” Campaign, a
main focal point was bringing jobs back to America. Large companies such as
Carrier/United Technologies were lobbied to bring jobs back on domestic soil
in order to boost the economy. On the surface level, this boosts the American
Economy through employment, but increased labor rates typically equate to
increase prices to the consumer unless other cost or tax saving measures are
levied.
Examples of Lower Consumer Prices Due
to Imports
u Televisions
u A mere decade ago a 50” plasma TV could cost several thousands of dollars, but
today a 50” LED TV can cost under $300. This can be attributed to technological
advances and the power of imports. Other items in the tech space such as
cameras, phones, and stereos have seen a decrease in price due to the advantages
of the import market and rapid technological advances.
In Summary
Strengths of Importing
u Strengthens the economy by
providing customers with lower
priced goods
u Allows for more diversity in
products that may be unable to be
produced in the home country
u Allows countries to concentrate on
producing those items that they
are most efficient at
Problems with Importing
u Reduction in manufacturing jobs in
the home country
u Forces countries to rely on one
another to supply goods
u Lowering pricepoint, which in turn,
lowers gross margin and can erode
profit
References
u Salvatore, D. (2015). Managerial economics in a global economy. New York:
Oxford University Press.
Explanation / Answer
First Question:
How can a country that imports prevent dumping? Dumping is initially charging a low price in the importing country till the local industries close down, the exporter then charges high prices and exploits customers in the country that imports.
Second Question:
How can a country that imports more correct its balance of trade? A country that exports more than it imports has positive net exports which mean more output, more employment, and higher consumer spending. This contributes to economic growth.