Archive forcomparative advantage

E-reader Market In Relation To The Rise of Apps and iPads

http://www.cnn.com/2012/09/06/tech/mobile/ipad-kindle-comparison/

https://www.wired.com/2015/04/kobo-new-ereader/

An E-reader is an appealing good because it gives consumers the opportunity to gain access to numerous e-books and there are even other features such as free samples of novels, the ability to highlight quotations, and some e-readers are able to even lend out books among users. The biggest competitive advantage regarding E-readers would have to be its usefulness – it is very portable and allows consumers to have the access to countless books. However, in actuality they only need to carry one “book” (the E-reader) around with them, which is not only far easier, but also more sustainable.  It is worth noting the undeniable influence that technological innovation has had in this market; for example, some consumers do not technically own a traditional E-reader, but use their Ipads (or tablets) to download virtual eBooks. E-readers can appeal to people from all ages and backgrounds since reading is a timeless activity and can serve many purposes ranging from educational to enjoyment. E-readers are not necessarily cheap, but the goal is to be able to invest in one for at least several years.

There has also been the entry of more substitute products, such as the Kobo and Ipad minis. These specific substitute products also illustrate a decrease in prices since they are both cheaper alternatives than previous models (Kobo is a cheaper alternative to Amazon’s Kindle, while Ipad minis are cheaper and more portable than Ipads); therefore, the demand of the E-reader market goes down.

It is necessary to note apps’ dominance in the technology industry; in fact, Apple’s App Store now offers over 225,000 apps for sale. This is actually detrimental to the demand for E-reader devices (even including Ipads) because now consumers are less willing to invest in purchasing these types of products, since they could just easily download apps on their smartphones where they can utilize virtual eBooks. Ultimately, the most influential shock to this market was the apps because it changed the way people access eBooks because now they do not even always see a need to purchase an E-reader device, or even an Ipad, anymore.

 

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http://www.forbes.com/sites/chuckjones/2016/11/17/one-overlooked-reason-trump-shouldnt-impose-tariffs-on-china/#5c7dd1032802

This article talks about why tariff on China’s exports would not be wise in the aspect of rare earth trade between China and USA. Rare earth is an strategic resource that is crucial in the national defense such as composition of advance alloys and in civilian uses such as batteries. Thus, if Donal Trump impose a tariff as high as 45% on China’s export, China would most likely restrict its rare earth export. China remains as the world dominant export country of rare earth with 105 thousand metric tons compared to 4.1 thousand of the US. China has absolute advantage in the production of rare earth. It would not be wise for Trump be adopt a Beggar-Thy-Neighbor policy, for it would leave China with no choice but to engage in retaliatory policies. The effect on rare earth trade is an externality of the possible trade tariff. Considering the mass demand in the market for batteries in smart devices, an tariff is not only damaging Sino-US relation but also destructive to the world economy.

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The Advantages of Comparative Advantage

Comparative advantage is a concept that is difficult to grasp. However, the following article clearly explains its mechanism. The supporting idea lies in opportunity cost which is a topic that does not come to mind instantly.

http://www.washingtonexaminer.com/will-no-american-politician-speak-for-free-trade/article/2603917

The article provides a very good example with Winston Churchill. Churchill was amazing in both writing and building. But, because his opportunity cost of building (i.e. not enough good writing about politics) was much higher than the opportunity cost of writing (i.e. a moderately built wall), it was better if he invested his time in writing. In the very example, there is also another advantage which is to the bricklayer that is hired to build Churchill’s walls. The brick layer is employed and thus receives economic benefits. Similarly, the consumers are receiving high quality writing content because of Churchill’s focus on writing.

We could conclude that comparative advantage is beneficial to both parties who participate in it because it takes the opportunity cost (which is taken for granted most of the times) and applies it to the most efficient way of producing something.

Similarly, the article uses other examples like Hong Kong, Singapore, Britain, NAFTA and explains how comparative advantage have benefitted or will benefit them or the parties involved.

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Maersk previously Monopolized Trade; now Separating and Specializing

http://www.bbc.com/news/uk-scotland-scotland-business-37441698

Maersk being one of the largest shipping companies in the country has monopolized the shipping industry in Denmark for 11 years. The country worries that the company has decreased in trade. In order to counterbalance their decrees in trade, the 112 year old company is breaking up its  590 ships large and 500 smaller ships. The company currently  is the operator of one of the biggest gas field developments in the UK waters, along with monopolized production in  Denmark, Qatar, Kazakhstan, the US Gulf of Mexico and Algeria. Additionally, further development is currently underway in half a dozen other countries.

They have decided to split form their oil, drilling,  and offshore services, as profits in that division have come in far below their predicted expectations. The companies decision to separate businesses will allow them to focus on their most profitable markets. The company has decided to focus on its transport and logistics business. Their decision to shrink back from the global market will allow then to specialize in the areas where they can make the greatest profit.

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China – Kenya gains from trade

Some news articles have suggested that China has moved into Kenya with a view to exploiting the country’s natural resources but without bringing benefits for Kenyans. This Brookings Institution blog post argues that Chinese firms are bringing new jobs and consumers goods to Kenya. The involvement of Chinese firms in many sectors has resulted in net gains from trade in foreign direct investment (FDI). By reducing barriers to domestic production, Kenya could help domestic firms play a larger role in domestic and international trade.

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