The three core economic issues which influence the decision-making and economic stability of the countries are What, How and to Whom. It is assumed that in different countries, manufacturers and distributors use different economic theories in attempting to fulfill preferences. The countries selected for analysis are Guatemala, China and Japan.
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Guatemala is a developing country located in Central America. Guatemala is considered one of the poorest countries in the region with high poverty rates. In spite of democratic changes and new political agenda, Guatemala suffers from political and social instability which affects living conditions and, in turn, migration decisions of the population. In Guatemala, the core economic issue, ”What“, means additional social and financial support for poor, low inflation rates and economic stability. The changes in microeconomics can be achieved in products and services as well as the effects of price competition and Innovations. In order to answer “How” these changes are made, it is possible to assume that liberalization of trade and changes in production and distribution will help local companies compete for consumer choice; they will succeed if buyers choose to accept them (Pindyck and Rubinfeld 42). The country officials should accept that if sellers offer differentiated, but substitutable products, native population will differ also, not only in the amount, but also in the type of product, they are willing to purchase at a low price. The proposed solutions should be directed at lower social classes and the population in general in order to support people in need and help local manufactures to sell their products. It is important to recognize that demand cannot be structured solely in terms of prices and quantities, with consumers choosing more or less of what is essentially the same product. The existence of product differentiation in Guatemala will help to expend market operations and increase product flows (Besanko and Braeutigam 33).
China is the developing country with GDP $7.8 trillion(2008). The core economic issue, “What”, can be described as stabilization of market operation and inflation rates. In China, buyers are different not only in their incomes and their sensitivity to prices but also in their preferences. In China, each manufacturer takes steps to ensure positive economic relations — by his selection of particular materials and the specific details of technology; by the use of distinctive packaging and a brand name to identify a product; by promotion of its superior quality or its appeal to gourmet tastes. But all such attempts are worthless unless the potential buyers are willing to recognize significant differences between products. The issue “To Whom” means that the state and local companies are responsible for their action to the society and to the customers worldwide (Besanko and Braeutigam 33).
In China, it is important to recognize that the relation between non-price competition and buyers’ needs makes information, on both sides of the market, essential. As consumers of a main product, they confront many local manufactures of products that are closely equivalent: the consumer’s needs for differentiation is satisfied by the existence of a wide range of items. The information about the differences in goods and prices, consumers could select the particular product that best fits his set of needs and demands; his choice would reflect not only the accessibility of substitutes but the degree of similarity to which they are equivalent. The idea is that the more information customers have about the product and services offered by each of the existing manufacturers, the better off are the buyers (Pindyck and Rubinfeld 42).
The third country selected for analysis is Japan. Japan is a leading developed country with stable economic and political situation. Japan plays an important role in the region, and has promoted the GATT (now WTO) procedure since becoming a member. Today, Japanese industry needs significant overseas markets to sell its product and increase market flows. The microeconomic issues “What”, can be identified as new internal markets and improved quality of goods sold to international consumers. In contrast to two previous countries, Japan has stable economic position and high FDI flows. In this case, local manufactures play a key role in informing internal buyers, not only through the manufactures’ promotion, but also the retailers’ displays and presentations, the explanations and advice by a salesperson (Besanko and Braeutigam 33).
The issue “How” means increased cooperation with international community and the European Union. Such activities will help Japan to increase financial operations and enter new markets. Financial plans and other methods of deferred payments will become an important part of the marketing process, and again these are introduced by local companies and the larger manufactures. Given information about market demands as well as estimates of the quantities that international consumers will take at different prices, the profit-maximizing company produces the particular product that best fits its available resources of technology and know-how. (Bade and Parkin 11).
In sum, different economic development of a country creates different needs and solutions for the state economy. In these circumstances, the manufacturer can differentiate his output from that of competitors most effectively by incorporating in his goods the differences that buyers will find significant — by giving consumers, in short, what they demand. This information allows saying that the government will be responsible for its actions and market operations and will have to meet legal and moral obligations. The manufactures will be responsible to local consumers and the internal consumers’ buyers their products and services.
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Bade, R. , Parkin, M. Foundation of Microeconomics Addison Wesley; 2 edition, 2003.
Besanko, D. Braeutigam, R.R. Microeconomics. Wiley; 3 edition, 2007.
Pindyck, R.S., Rubinfeld, D. Microeconomics (5th Edition). Prentice Hall; 5th edition, 2000.