Free Trade Essay Example | Topics and Well Written Essays - 1500 words

Free Trade - Essay Example Free trade also underscores the benefit of the foreign direct investment in Canada, particularly by the United States in their bilateral trade. To cite an example, Alex Rugman (1990) points to the greater stock of US foreign direct investment in Canada than Canadian foreign direct investment in the United States. (p. 78) The impact of this fact offsets the reservations of critics regarding the outward flow of Canadian wealth to other countries. It makes sense to think that because of the larger amount of capital invested, the US firms in Canada demand more labour than those needed by the Canadian firms operating in the US, or the jobs â€Å"lost† when Canadian capital is funneled abroad. Free trade also addresses the issue in regard to tariffs and the concept of â€Å"rules of origin.† It is inevitable to have discrimination in favor of supplies from one country, risking the diversion of lower-cost supplies from another. By reducing tariff levels in multilateral system, free trade can reduce discrimination as well as strengthen cost control. (Barton, Goldstein & Josling 2006, p. 176) The value of the Canadian dollar that accompanied the negotiation and implementation of free trade upset all projections of benefits to Canada†¦ In effect, an increase in the exchange rate of 15 percent is equivalent to imposing a tax on all exports of 15 percent and removing a 15 percent tariff on imports. (p. xvii) Finally, it is important to highlight that free trade agreements in general lead to internal reforms and that all countries that are engaged in them may benefit from it. There is the aspect about raising standards to bolster competitiveness, for example. To illustrate: Since Canadian customers now have better access than ever before to products and services made in the United States, they have become more demanding consumers as they assimilate the American consumer expectations. While

Discuss the meaning and importance of the concept of elasticity in Essay

Discuss the meaning and importance of the concept of elasticity in microeconomic reasoning - Essay Example n help economists ascertain whether it would be more profitable to increase or decrease the price of a particular product based on price elasticity of demand. Elasticity helps determine if a good is of inferior quality or normal quality based on price elasticity of demand. An inferior quality product is consumed less if the consumers’ income increasing while a normal quality product has higher consumption along with rising income of the consumer. Similarly, Elasticity can help decide whether the products are compliments or supplements. The difference between the two is that with complimentary goods the demand for one leads to demand for another of the same product, while supplementary goods are those that guide to less demand for another product. Cross price elasticity of demand determines if a product is a compliment or supplement. And lastly, price elasticity of demand can help economists find out whether her a supplier e.g. a farmer, will have the capability to suddenly inc rease their supply. Farmers and other agricultural goods producers have low price elasticity of supply as it takes them a long time to increase their supplies because their supplies take a long time to produce. So, in short, elasticity is used when economists want to know how something changes in relation to a change in another. The concept of elasticity is an integral part of the theory of microeconomics. Law of demand tells us that an increase in the price of a product leads to a decrease in its demand. Here, Elasticity can tell us how much demand will decrease for every one per cent increase in price. An elasticity of 1 or higher is â€Å"elastic†. While inelastic refers to products that remain on constant demand no matter what their price