Supply, Demand, and Elasticity in Global Trade
Technological changes have advanced the levels of global trade among the nations. Technology supported innovations have provided a new spectrum in the management of complex situations in the world today. This can be seen from the medical angle where the management of complex diseases like cancer can now be managed competently as compared to earlier years. The operational potential of businesses has equally improved. In fact, this can be attributed to the presence of a global platform where discussion, trade deals, and capacity support are encouraged based on a win-win model. Multinationals have the operational advantages of conducting their business on this platform and managing their business from several countries while taking advantage of the local resource bases in such countries. For instance, multinationals have the advantage of operating in the Chinese geographies due to its relative cheap labor costs compared to other destinations of the west. Accordingly, the availability of raw materials equally influenced operations of these multinational. China is one major beneficiary of globalization.
Supply, Demand, and Elasticity
The China as country has gone through various changes to emerge as a strong destination for trade. The variances witnessed in the concepts of global trade from the aspects of profitability to partnership have generated positive competition levels and strategic realignments. The importance of globalization in managing the issues of trade has escalated the demand and supply on the global platform. International interactions are currently simulated on the platforms of the demand and supply of raw material or finished products to promote economic development. However, innovations across the world destinations, especially China play a big role in witnessing change in process management while developing platforms for faster delivery of both raw materials and the finished products.
The technological advancements witnessed today in transport and shipment services have supported the demand and supply situations, increasing its elasticity in several global destinations. Globalization has opened up global destinations that were earlier projected to be business novices to emerge as strong negotiators and primary players in the sourcing raw materials for manufacturing sectors of the world. It is evident that China has benefited from the advent of globalization through technological advancement and innovations. Therefore, the discussion will examine the concepts of demand and supply elasticity from the context of its applicability to the global trade and the dynamic variances that China experiences.
Demand and Supply Elasticity Influencing GDP
China has strategically positioned itself on the global platform as a manufacturing destination. The improved gross domestic products for the country has been improved and facilitated by the impacts of globalization and international trade blocs. The country has substantially gained from globalization and modern innovation systems in the trade sector. Previously, China and other countries had suffered serious economic challenges with countries like the United States of America – US, Germany and the United Kingdom – UK among others dominating the global trade platform due to their influence and resource dominance. The ability of countries to tie together strategies and resources has developed effective business partnerships, leading to building better economies and improved GDP. China, for instance, has strategically positioned itself as a competitive technological hub, providing access to raw materials and the technological infrastructure for production. Indeed, this has seen the country grow as one of the strongest economies in the entire continent. China has continued to define itself as a labor competitive business hub of choice on the continent.
The demand for jobs in China has increased over the decades leading to a high percentage of unemployed expatriates from various technological disciplines. The economic theory of the law and supply-demand as a fundamental principle governing trade provides the foundations that whereas the supply of a products or service increases, the reflexes will lead to the fall in price or vice versa (Vernimmen et al., 2014). Accordingly, the oversupply of expatriate labor in China led to the fall in price leading to an influx of multinationals in the manufacturing and production sectors. The resultant advantage was the improved GDP for China compared to other world destinations whose labor costs still rated high.
The position of China is also supported by the Adam Smith absolute advantage theory. Comparison of the theory by Smith upholds the foundation of other theories in support of the ability of a nation to produce more efficiently than other nations (Ragland, Widmier, & Brouthers, 2015). The theoretical foundation of Smith is opposed to trade restrictions supporting the position that trade should freely flow within mutual trade blocs or nations. The prioritization hypothesis of the theories maintains that a country manufacturing a product cheaply should focus on the furtherance of the production levels to improve towards specializations levels. Smith’s theory argues from a contextual aspect, which indicates that an increased efficiency in production by a country leads to improved livelihoods for its people. From cars to computers, including general ware products, China operates one of the most robust manufacturing industries in the world.
Similarly, countries such as India previously categorized as underdeveloped have risen through the ladder of globalization to become a world hub of medical tourism. Indian medical infrastructure has been well developed and rates highly compared to other western destinations. Thomas Freidman and his optimism in the impact of globalization construct an ideology that the adoption of neoliberal policies and measures by world governments has positive impacts of economic globalization that informs increasing trade and trading blocs between nations (Bernier, 2016). The simulations are accelerated through trade relationships across the world, which increases prosperity for citizens while strengthening the relationship between such nations. The ideologies of Thomas Freidman can be equated to the strategies employed by China or India among other countries of the world. Vernimmen et al., (2014) posit that the principle, degree of responsiveness from customers on a global trade partnership is premised of the supply and demand of goods and services that respond to positive variations in the global prices.
The demand and supply elasticity encapsulates the greatest impact on the development of trade in China over the recent decade as compared to other nations of the world. Worth noting is that the medical tourism in India has been growing at an average rate of 30% per annum from 2014. The medical tourism industry costing in India was approximated at £333 million (Dunn, 2015). The approaches of retailing unique products or expertise have seen countries develop their economic and trading frontiers, leading to improved livelihoods and higher GDP level. India strategic positioning of relatively cheaper medical care system for complex health challenges like cancer has elicited the demand for such healthcare on the global platform. While India boasts as a medical health tourism destination, China operates a superior labor and manufacturing destinations, creating demand and supply elasticity situations to their advantage. The situations of India and China can be used to explain the importance of competitiveness, innovations, and effective pricing strategies as the main principles of improving GDP for struggling nations.
Larger and economically stable countries have started to take advantage of globalization to stimulate research and development leading to superior innovations. Similarly, smaller nations should equally take advantage of globalization to implement their business interest for growth and sustainability, especially taking advantage of the demand or supply arrangement with their forecasted business partner states
The mercantilism and the economic theory construct a position, which indicates that a country’s wealth is a predetermination of the levels of gold and silver it owns (Dunn, 2015). The 16th-century theory was believed to promote the aspects of import for wealth gaining while discouraging exports. The theoretical foundation takes cognizant of the importance of wealth creation for countries of the world. China is one such country whose demand and supply situations have elevated its global scenarios due to the level of imports and export business of the country. World nations should struggle to reduce trade deficits since they define the foundations on which the Mercantilism theoretical foundation is premised. Therefore, a country should endeavor to receive as much import quotas from other nations as possible as a source of wealth creation. In fact, the country will then apply the wealth generated through its demand and supply measures to improve the livelihoods of its citizens. Economies are experiencing tremendous growth where centrist stability is improving through partnership bringing up progressive legislation and responsible political leadership.
The Price Elasticity for China Products
There is a systemic relationship between price and the quantities of products or services demanded or supplied within a market. At ceteris paribus, it is often expected that the variances in price will affect the levels of demand and supplies in the market. The theoretical underpins elasticity as the relationship between the quantity of demand and supply to a different variable like price or income. Price elasticity of demand seeks to measure the ultimate degree of receptiveness of the quantity of a product demanded in the market to change due to its price variances. Therefore, this implies that percentage of the changes in the prices of a commodity could be met by a percentage in the demand situations of the same commodity. Similarly, the rationalizations of prices and the availability of raw materials have put China as a global focus for competitive business. China enjoys investments opportunities due to its strategic position of reasonable labor prices, which impacts positively on its supply sector in the manufacturing sections due to the increased demands for its products worldwide.
China Pharmaceutical Products in the United State
China is a strategic partner of the United State of America in the pharmaceutical market. Kotabe and Kothari (2016) assert that the pharmaceutical products of China are rivaling other nations within the United States pharmaceutical industry. The US gains competitively from the raw materials sourced from Chinese destinations. Nearly all supplements sold within the United States have undergone a major re-formulation in order to utilize the cost-saving advantages from raw material sourced from China. The price advantage of the Chinese pharmaceutical products to the US gives it a competitive advantage over other suppliers.
The importance of environmental management as a facilitator of global trade and economics should be given preference since it determines the progress of every sector in the world business sector. China is a harbor for extensive raw materials used in the manufacturing sector in various industries (Winans, Kendall, & Deng, 2017). In this case, the price elasticity of demand seeks to measure the ultimate degree of receptiveness of the quantity of a product demanded in the market to change due to its price variances. As a global partner in manufacturing, China enjoys both aspects of availability of raw materials for manufacturing and the accredited expatriate and competitive labor, giving it a competitive advantage over the members of its trading bloc.
Knudsen and Lafferty (2016) explain the importance of the ten principles of trade that anchors the principal foundation with respect to the world effective management of raw materials for the production of quality products for the world market. The principles of trade take a viewpoint that trade and investment in the global arena actively contribute to the sustainable attainment of the supply and demands of the products expected. Socioeconomic developments are currently shaping the world through the elasticity of demand and supply on the commodities produced. The approach of price elasticity in the context of the trade relationship between China and other global destinations can be explained as elastic. Accordingly, the world interaction level simulated by the exchange of raw materials and the availability of competitive labor continues to grow and managed through the frameworks of globalization. The improvement within the manufacturing sectors of China is an important aspect in making comparisons between the demand and supply levels in the country. Indeed, this includes responsible manufacturing systems that accommodate the quality of products demanded in the market.
The Conflicts of Labor in the Demand and Supply Market
Despite the fact that China faces labor advantage compared to other destinations in the world, the aspects of labor violations and employee labor rights abuse of people working under international trade arrangement is affecting the manufacturing industry of China. World labor associations and trade unions have constantly advocated for uniformity or harmonization of salaries and wages within similar job groups, which challenges noncompliance within the Chinese market. Even though labor violations are happening in several destinations of the world, the impacts of such violations in China are high. Card et al., (2018) expresses the link between labor violations affecting the quality of final products, which leads to the challenges of supply and demand. The employees of the Apple Company in China have recently expressed challenges related to labor rights and freedoms in China. China’s focus on profitability has led to the decline of demand from its strategic blocs due to the quality and standardization issues. The Unitarist theory of industrial relations provides approaches that advice on industrial issues affecting employees (Bloch & McKay, 2015).
An employer like the Apple manufacturing company – China principally focuses on profitability rather than concentrating on the welfare of the employees for sustainable operations. Bloch and McKay (2015) are of the opinion that Unitarist approaches have issues with employee unions, fostering the logic that loyalty away from the employer is a distraction. The authors explain further that people who work under conditions that only aid them to attain basic necessities live in a vicious cycle that rolls around the abject poverty. The linkage between satisfied employees and demand for the supply of products is impacted by the variables of quality. Therefore, quality becomes an important variable that controls the price and demand for products in the market. Labor and salaries or wage harmonization as a determinant of the cost of products is a constituent denominator in influencing the elasticity of demand and supplies in the market. Marxist theory of industrial relations constructs a theoretical approach to labor and the concept of capitalism as attributes that influence the demand and supply elasticity. The Marxist theory posits that capitalism raises elements of corruption and greed and hence exposing the employee to hardship and violations of their rights while the organizations accrue high-profit levels. The concentrations of profitability subdue the essence of international trade agreements and its constituent principles, leading to collapse of a healthy and effective business relationship.
Technological advancement in the global platform has a positive influence on the demand and supply elasticity. Innovations are supporting the global business environment, leading to increased demand and supply of commodities. The swiftness at which raw material is able to move from one business location to another is evidence of the positive influence of technology on the attainment of business goals on the global platform. The low pricing strategy of China, both on its labor capital and prices of the raw material it supplies to other world economies impacts positively on its elasticity. There is evidence that innovations like electric trains and other safer yet swifter means of transport are better examples that point out to the technological superiority of China in supporting the demand and supply of its commodities in the market.
The elasticity of demand and supply, when compared to the variable of price, has given China a competitive edge over other regional players in the market. China low capital and quality expatriate labor force compared to the high manufacturing prospects within its borders places the nation at better levels on the global business and economic rating. China is currently among the world’s first manufacturing destinations, enjoying comprehensive stability of its industry. From housewares products, clothing lines, hardware/building materials and the technology-driven innovations like computers, mobile telephony apparatus, including the complicated 3D-7D simulations or the Augmented Reality simulations, the country has attained better industrial developments due to the impact of its pricing strategies in the supply and demand situations in the global market.