Important Assignment about Micro economics Example | Topics and Well Written Essays - 2000 words

Important about Micro economics - Assignment Example In international business, outdoing the production of a country remains impossible as it does not relate on the national scale. Comparative advantage applies in businesses, but when it comes to doing business across the borders a nation considers more than one business. Comparative advantage and absolute advantage are two different aspects. The article compares the absolute advantage of Bangladesh and U.S. Bangladesh cannot produce more goods per unit in comparison to the United States but they can produce goods per unit at a lower price. Comparative and absolute advantage does not hinder countries from conducting business. For instance, Bangladesh may have a comparative advantage in the production of sewing garments, even if Americans can produce better. They both benefit if Americans outsource the production from Bangladesh. American can then focus on producing products that they are far much better in producing. The two economies hence grow through interaction and exposure in doin g business. Comparative and absolute advantage plays an important role in regulating product production across boundaries. According to the article, the limit to which a country retracts production depends on the goods and services in question. A country remains in comparative and absolute advantage if the regulation of production maintains. ... or services below the expected target Application The article indicates a shortage of gas in Mexico due to the surplus production in the United States. The move leads Mexico to reduce the supply of gas to its market consumers with a great margin. A surplus by the United States in the production of gas effects on the energy based companies. Main contractors including Pemex reduce their gas supplies to deal with the surplus through measures set on every producing company. Mexico hence faces a shortage due to the production boom in the United States. The relation between the U.S. and Mexican rates led to the price of gas lowering. This led to a decrease in the wholesale price hindering manufacturers from obtaining the required amount of energy. A surplus in production of gas means the two countries have to utilize the excess amount of gas in the market before producing more gas. Mexico hence suffers a shortage after its home based companies reduce the level of production. In market anal ysis, the problem arises from pricing as opposed to penalties and pipelines. The increase in imports into the Mexican market makes gas available for the local market at a cheaper price as compared to the gas offered through the local production. It becomes logical for businesses to purchase the imported, cheap gas as compared to the expensive, local produced gas. Supply and demand depends on the readily available market for selling products and services. Link: http://au.ibtimes.com/articles/381641/20120907/surplus-shale-leads-gas-shortage-mexico.htm Chapter 4: Consumer and Producer Surplus Chapter 4 terms Consumer surplus: Consumer surplus is a measure of consumer satisfaction where customers are willing to spend more on a product than the stated market price. . Producer surplus: Producer