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This essay seeks to present an insight into an emerging economic event in china. China is among the top performing economies in the Asia. Its economic growth has been remarkable over the last years. Local economists predict an increase in the domestic growth. However, this might not be the case because there are some signs of economic stagnation.
This is a period when the levels of domestic production are either declining or constant. The major causes of weak domestic production are insufficient skills, insufficient raw materials and/ or low demand for consumer products. This essay therefore, humbly, concisely and clearly reflects the key points contained in the economic article by Bradsher (2013).
The essay also contains an application of major economic concepts of supply and demand, market structures, elasticity and cost of production into the real perspective of China’s economic trend as depicted in the article. Below are weightier issues.
According to Bradsher (2013), top Chinese economists have noticed an indicator of a decrease in the Chinese exports. Exports are the goods and services that china ships out of the country to meet the demand of an external market, say Australia. Another key point in the article is the fact that china’s economic growth is sluggish. Economic growth of a country (including China) is measured by various criteria.
Total domestic production forms a foundation for an economic growth. Domestic production derives its stimulation from the level of local and international demand for goods and services. Concisely, the only reason for china’s economic growth is the availability of lending services from policy-regulated financial institution and overnight package.
Increase in lending has boosted the levels of production whereas low demand for the goods and services both in the local and international market, suppresses the growth. Another key factor on its own is the increased lending in China. The Chinese government has increased lending opportunities to businesses. The rationale for the move is to stimulate production and thus economic growth.
The last key point is about consumer spending. Noticeably, the levels of consumer spending have been rising in the country. Consumer spending levels can be measured by household-purchase quantity levels and/or quality. The more the quantity of goods and services purchased by consumers, the higher the spending levels. The argument is true when quality is considered. The higher the quality of goods and products purchased by consumers, the higher the spending levels (Buchanan, 1999).
Economic concepts in application
Supply and demand- demand is the ability and willingness of a consumer to spend a specific amount of money on a commodity at a particular time. Demand of a certain good or product is influenced by taste and preference, levels of customers’ income, availability of alternatives and price of the goods and services. Decreased levels of demand for Chinese products in the international market are the chief cause of weak levels of export experienced by the country.
In simple terms, the ability and willingness by international consumers to buy goods and services from China has decreased. The reasons for the decrease are the same factors that influence demand. For instance, the international market could have identified a cheaper source of goods that the Chinese producers provide. In that case, they would channel more of their resources to purchase from a cheaper supplier as opposed to China (Buchanan, 1999).
The willingness of Chinese nationals to consume local goods is the reason for increased consumer spending in China. That is, consumers only spend on what they want and need. Demand, on the other hand is induced by consumers’ needs and want. The more the needs and want (demand), the higher the levels of spending and aggregately, this leads to increase in consumer spending (Adil, 2006).
Supply on the other hand is the ability and willingness of a seller to sell his products at a specific price at a particular time holding things constant. The levels of supply are influenced by prevailing commodity prices, prices of alternative commodities and prices of factors of production. The Chinese state controlled bank has increased the levels of lending.
In other words, the supply of funds has increased. Therefore, borrowers obtain funds at a lower cost since the supply levels are higher than the demand (Buchanan, 1999). Cost of production- it is the price of the resources used to provide consumer goods and services. The factors of production (labor, land, capital and enterprise) have different prices due to their nature.
Cost of production can be offset by high profit levels due to high sales levels. During the period of low demand, sales levels are low and businesses make losses. Losses discourage production levels and thus less economic growth. China’s sluggish economic growth is partly because of unequaled cost of production (Adil, 2006).
To conclude, Bradsher (2013) is to the point going by the content of its article. Exports stimulate domestic production. It is also a source of foreign income to a country. If the levels of a country’s export decrease because of less demand for foreign goods by international markets, a chief production stimulus would be lost. Less domestic production would therefore impede economic growth rate, thus sluggish china’s economic growth.
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Adil, J. R. (2006). Supply and demand. Mankato, Minn: Capstone Press.
Bradsher K. ( 2013, August 8). China’s Economy unexpectedly stumbles again on weak export results. The New York Times. Web.
Buchanan, J. M. (1999). The demand and supply of public goods. Indianapolis: Liberty Fund.