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

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    (Original post by chica111)
    Supply of sterling is high relative to demand as less demand for UK exports, so depreciation.
    why?
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    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!!!!!
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    What is the relevance of price elasticity of demand when explaining primary product dependency?
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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
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    How does the Lewis theory increase growth and development?
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    (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
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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?


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    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
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    (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 ?


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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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    (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 ?


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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
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    (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
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    (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 :/
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    (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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    (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.
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    (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
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    (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
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    (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.
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    how would a country reduce their savings gap?
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    (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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