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Edexcel Economics Unit 4 Global Economy Discussion Thread (10.June.2014)

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Reply 340
Avatar for 44289
44289
Original post by chica111
Supply of sterling is high relative to demand as less demand for UK exports, so depreciation.


why?
Hey how are you guys revising on statistics on developed and developing countries. I have developed but still need more info on both
PLZ HELP!!!!!
Reply 342
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80286
What is the relevance of price elasticity of demand when explaining primary product dependency?
Reply 343
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Ff96
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Original post by 80286
What is the relevance of price elasticity of demand when explaining primary product dependency?


Supply is inelastic because of harvests etc (unit 1) demand is inelastic because limited food intake
Therefore any supply or demand side shock will cause a fall in revenue etc
Revenue fluctuations can be a barrier to invest
However some primary products are income elastic such as oil and diamonds etc. Also for agricultural goods, population of the world is growing so demand for food also increasing
Use prebisch singer hypothesis too - the idea of manufactured goods being elastic vs primary products inelastic etc
Reply 344
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80286
How does the Lewis theory increase growth and development?
Original post by Ff96
Supply is inelastic because of harvests etc (unit 1) demand is inelastic because limited food intake
Therefore any supply or demand side shock will cause a fall in revenue etc
Revenue fluctuations can be a barrier to invest
However some primary products are income elastic such as oil and diamonds etc. Also for agricultural goods, population of the world is growing so demand for food also increasing
Use prebisch singer hypothesis too - the idea of manufactured goods being elastic vs primary products inelastic etc


So if they have a bad harvest and supply falls, price will rise, but why will this lead to a fall in revenue?


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Original post by 80286
How does the Lewis theory increase growth and development?


Well the theory explains to transfer the surplus of labour from low productivity agricultural sector to a high productivity industrial sector. There is no opportunity cost of transferring workers and the industialisation would help increase investment which will increase productivity and profit, if profits are reinvested then further growth will occur
Reply 347
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Ff96
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Original post by Farringtonn
So if they have a bad harvest and supply falls, price will rise, but why will this lead to a fall in revenue?


Posted from TSR Mobile


My bad for the wording, it would lead to a higher price, but the fluctuations lead to uncertainty which is a deterrent for investment. It can also effect quality, so monopsony power could happen meaning farmers would have to sell at a low price to supermarkets
Original post by Ff96
My bad for the wording, it would lead to a higher price, but the fluctuations lead to uncertainty which is a deterrent for investment. It can also effect quality, so monopsony power could happen meaning farmers would have to sell at a low price to supermarkets


Can you link this to poverty too? Because the monopsony power means they sell at low prices so have low incomes ?:smile:


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Can somebody answer my question ? The benefit of free trade
The benefit of trade liberalisation
the augment against protectionism

are they basically the same thing?


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Reply 350
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Ff96
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Original post by Farringtonn
Can you link this to poverty too? Because the monopsony power means they sell at low prices so have low incomes ?:smile:


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Yes definitely, you can say that developing countries rely on their agriculture as their main source of income, then due to primary product dependency blah blah this would cause them to remain in poverty as low incomes. BUT some countries have developed due to primary products such as Botswana because of their diamonds
Original post by binbinbinnn
Can somebody answer my question ? The benefit of free trade
The benefit of trade liberalisation
the augment against protectionism

are they basically the same thing?


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yes.
free trade=no barriers
trade lib= lowering barriers
lowering protectionism=lowering trade barriers
Reply 352
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80286
Original post by Razina17
Well the theory explains to transfer the surplus of labour from low productivity agricultural sector to a high productivity industrial sector. There is no opportunity cost of transferring workers and the industialisation would help increase investment which will increase productivity and profit, if profits are reinvested then further growth will occur


But could we evaluate this by saying in developing countries the secondary sector doesn't even exist due to the low savings and thus lack of investment. I don't quite understand how the secondary sector was there in the first place :/
Original post by werkintwerkin
yes.
free trade=no barriers
trade lib= lowering barriers
lowering protectionism=lowering trade barriers


Oh thx! That will make my reversion a lot easier!!!


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Reply 354
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TheHenri
OP
1
Original post by Farringtonn
So if they have a bad harvest and supply falls, price will rise, but why will this lead to a fall in revenue?


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This is an evaluative point that Primary Product dependancy isnt necessary bad. If prices are high then no loss of revenues, but rather an increase in revenues.
Original post by Ff96
This is all I got:

It is associated with the savings gap, many developing countries face a shortage of foreign exchange. This is when a country’s balance of payments on current account deficit is greater than the value of capital inflows. This may be the result of:

-dependence on export earnings from primary products
-dependence on imports of capital goods and other manufactured goods
-servicing debt
-capital flight

Don't get it myself much tbh


That's from the revision guide right? I have it too but don't understand it
Original post by 80286
But could we evaluate this by saying in developing countries the secondary sector doesn't even exist due to the low savings and thus lack of investment. I don't quite understand how the secondary sector was there in the first place :/


Through trans national companies, you could evaluate by saying that profits may not be reinvested in to that country but may go back to their own country so it would be a leakage
Original post by aminkaram
That's from the revision guide right? I have it too but don't understand it


Foreign exchange gap in simple flow chart:

Developing country produces primary products = Low export earnings = (These earnings are in the form of foreign currency) = The gap is simply that they do not have enough foreign currency to buy imported goods.
Reply 358
Avatar for odbal
odbal
how would a country reduce their savings gap?
Original post by odbal
how would a country reduce their savings gap?


basically the three development models.
lewis says that surplus labour is transferred to manufacturing sector=increased income=increased saving
rostow says that you have to trade agriculture to gain foreign currency to buy capital equipment=move to manufacturing=increased savings.
theyre basically all the same just the first step is different tbh.

or maybe the imf would lend loans, or a country would give aid, debt relief all reduce savings gap. however there are disadvantages of the above which you should know

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