<< Chapter < Page Chapter >> Page >

Apple or samsung iphone?

The image is a photograph of the iPhone's home screen.
While the iPhone is readily recognized as an Apple product, 26% of the component costs in it come from components made by rival phone-maker, Samsung. In international trade, there are often “conflicts” like this as each country or company focuses on what it does best. (Credit: modification of work by Yutaka Tsutano Creative Commons)

Just whose iphone is it?

The iPhone is a global product. Apple does not manufacture the iPhone components, nor does it assemble them. The assembly is done by Foxconn Corporation, a Taiwanese company, at its factory in Sengzhen, China. But, Samsung, the electronics firm and competitor to Apple, actually supplies many of the parts that make up an iPhone—about 26%. That means, that Samsung is both the biggest supplier and biggest competitor for Apple. Why do these two firms work together to produce the iPhone? To understand the economic logic behind international trade, you have to accept, as these firms do, that trade is about mutually beneficial exchange. Samsung is one of the world’s largest electronics parts suppliers. Apple lets Samsung focus on making the best parts, which allows Apple to concentrate on its strength—designing elegant products that are easy to use. If each company (and by extension each country) focuses on what it does best, there will be gains for all through trade.

Introduction to international trade

In this chapter, you will learn about:

  • Absolute and Comparative Advantage
  • What Happens When a Country Has an Absolute Advantage in All Goods
  • Intra-industry Trade between Similar Economies
  • The Benefits of Reducing Barriers to International Trade

We live in a global marketplace. The food on your table might include fresh fruit from Chile, cheese from France, and bottled water from Scotland. Your wireless phone might have been made in Taiwan or Korea. The clothes you wear might be designed in Italy and manufactured in China. The toys you give to a child might have come from India. The car you drive might come from Japan, Germany, or Korea. The gasoline in the tank might be refined from crude oil from Saudi Arabia, Mexico, or Nigeria. As a worker, if your job is involved with farming, machinery, airplanes, cars, scientific instruments, or many other technology-related industries, the odds are good that a hearty proportion of the sales of your employer—and hence the money that pays your salary—comes from export sales. We are all linked by international trade, and the volume of that trade has grown dramatically in the last few decades.

The first wave of globalization    started in the nineteenth century and lasted up to the beginning of World War I. Over that time, global exports as a share of global GDP rose from less than 1% of GDP in 1820 to 9% of GDP in 1913. As the Nobel Prize-winning economist Paul Krugman of Princeton University wrote in 1995:

It is a late-twentieth-century conceit that we invented the global economy just yesterday. In fact, world markets achieved an impressive degree of integration during the second half of the nineteenth century. Indeed, if one wants a specific date for the beginning of a truly global economy, one might well choose 1869, the year in which both the Suez Canal and the Union Pacific railroad were completed. By the eve of the First World War steamships and railroads had created markets for standardized commodities, like wheat and wool, that were fully global in their reach. Even the global flow of information was better than modern observers, focused on electronic technology, tend to realize: the first submarine telegraph cable was laid under the Atlantic in 1858, and by 1900 all of the world’s major economic regions could effectively communicate instantaneously.

This first wave of globalization crashed to a halt in the beginning of the twentieth century. World War I severed many economic connections. During the Great Depression of the 1930s, many nations misguidedly tried to fix their own economies by reducing foreign trade with others. World War II further hindered international trade. Global flows of goods and financial capital rebuilt themselves only slowly after World War II. It was not until the early 1980s that global economic forces again became as important, relative to the size of the world economy, as they were before World War I.

Questions & Answers

what is Monopoly
Dauda Reply
The word Monopoly is a Latin word. it is the combination of two words-Mono means single and Poly means seller. thus Monopoly means single seller. but this is not the full meaning of Monopoly. Monopoly must produce a product which does not have close substitute in the market.
Basanta
Monopoly is define as a firm in an industry with very high barriers to entry.
Favour
If close substitute is available, Monopoly will be a king without a crown.
Basanta
what does it array
Cbdishakur Reply
what are the differences between monopoly and.oligopoly
Onome Reply
what are the difference between monopoly and oligopoly
Cbdishakur
The deference between Monopoly and Oligopoly: Monopoly means:A single-firm-Industry producing and selling a product having no close business and Oligopoly means:A market structure where a few sellers compete with each other and each controls a significant portion of market .
Basanta
so that the price-output policy one affects the other.
Basanta
what are difference between physical policy and monotory policy
hon
what is economic
Emakpor Reply
what is economic
Cbdishakur
the word economic was derived from the Greek word oikos (a house)and mein(to manage) which in effect meant managing a household with the limited funds available 🙂.
Basanta
good excample about scarsity
hon
An Enquiry into the nature and causes of wealth Nations, this book clearly defined what economic is🙂🙂🙏🙏 thank you...
Basanta
good example about scarcity: money,time, energy, human or natural resources. Scarcity of resources implies that there supply is very much limited in relation to demand.
Basanta
equilibrium is a situation in which economic forces such as demand and supply are balanced and in the absence of external influences,the value of economic variables will not change
Onome Reply
hmnn
Emakpor
marginal cost and marginal revenue is equilibrium .
Kho
yessss
Basanta
what is equilibrium
Rodrice Reply
policy prescriptions for unemployment
Jeslyne Reply
Am working on it
Blacks
Study
Janelle
study
simeon
what are the factors effecting demand sedule
Kalimu Reply
we should talk about more important topics, you can search it on Google n u will find your answer we should try to focus on how we can improve our society using economics
shubham
so good night
hon
ways of improving human capital
kelly Reply
what is human capital
kelly
Capital can be defined as man made assets use in production .
Abdulai
What is the differences between central Bank And Commercial Bank ?. 2 for each
Abdulai
Two types of bank clearing house.
Abdulai
what are the most durable assets of a bank
Ngongang
What is Opportunity Cost?
Cephas Reply
may be defined as expression of cost in terms of forgone alternative.
Abdulai
Helloo, im new, can i get to know more?
Saniya Reply
You ask questions on any topics you find difficult.
Favour
What is opportunity cost?
Cephas
is price elasticity of demand the same as elasticity of demand
Favour Reply
not really
Victoria
hi
Gh
hello
Bhartendu
i hope everyone be ok
Gh
No
Hassan
please explain
Favour
No
William
explanations please
cleophas
price elasticity of demand is the reaction of customers /demand to price changes(increase or decrease) elasticity of demand is the reaction of prices brought about by the change in demand
Victoria
thank you
Favour
state the laws of demand and supply
William
dd: when price rises demand decreases whereas when price reduces dd rises ss: when ss rises the price rises and when ss decreases price also reduces. There is a positive relationship
Dhoonah
nice
Victoria
Draw a demand curve graph
William
though price elasticity and elasticity are used interchangeably, the demand can respond to income changes and prices of related goods as well.
Gurpalak
explain the difference between merit goods and public goods and show why it is possible for profit to be made in the supply of one of these types of good but not the other
Kavishek
Public goods are defined as products where, for any given output, consumption by additional consumers does not reduce the quantity consumed by existing consumers. Merit goods are, for example, education and to some extent the health-care. They are provided by state as "good for you".
ahmed
The ladies are doing much better than the men
Blacks
what happens when there is a shift in demand curve?
Favour
What is Specialization ? Explain in detail
Muhammad
any one ?
Muhammad
specialisation is a method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency.
Favour
It's ok
Muhammad
hello
Onome
yah
Abdulai
No. price elasticity of demand refers to the manna in which price of good demanded fluctuate mean while elasticity of demand explains the way consumer change in their willingness as they plan or purchase a good
Ngongang
diffirence between demand and supply
Bonny
Demand refers to the quantity of a product that purchasers are willing and able to buy at a various prices per period of time, while,Supply refers to the quantities of a product that suppliers are willing and able to sell at various prices per period of time.
Favour
what is economic
Seray Reply
It is a social science which studies human behavior as a relationship between ends and scarce which have alternative uses
Obeng
what is norminal wage
Demba Reply
is the wages measured in money as distinct from actual purchasing power
Favour
what is demand curve
Azeez Reply
this is a curve that slop downward from left to rich
Obeng
yes
Basanta

Get the best Principles of economics course in your pocket!





Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?

Ask