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Discuss three economic factors which affect the competitiveness of Irish firms in international trade - Leaving Cert Economics - Question b - 2012
Question b
Discuss three economic factors which affect the competitiveness of Irish firms in international trade. Outline how international trade benefits Irish consumers.
Worked Solution & Example Answer:Discuss three economic factors which affect the competitiveness of Irish firms in international trade - Leaving Cert Economics - Question b - 2012
Step 1
Discuss three economic factors which affect the competitiveness of Irish firms in international trade.
Answer
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Irish Inflation Rates vs. Competitors: Inflation in Ireland plays a crucial role in the price competitiveness of Irish firms. If the inflation rate in Ireland is lower compared to its export markets, this results in lower prices for Irish goods in international markets. Consequently, firms can maintain a price advantage over their competitors who may face higher inflation, thus enhancing their market appeal.
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Value of the Euro vs. Other Currencies: The strength of the Euro relative to other currencies can significantly impact export prices. If the Euro is high compared to the dollar or sterling, it makes Irish exports more expensive for foreign buyers. Conversely, a weaker Euro might boost international competitiveness as Irish products become relatively cheaper abroad, increasing sales volume.
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Transport Costs: Given Ireland's geographic location, transportation costs are an important factor affecting competitiveness. High transport costs can erode the profit margins of exporters since these costs must be included in the final price of goods. Fluctuations in transport costs, driven by global oil prices or logistical challenges, can create unpredictability that negatively impacts pricing strategies.
Step 2
Outline how international trade benefits Irish consumers.
Answer
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Greater Choice of Commodities: International trade allows Irish consumers access to a broader variety of goods and services that may not be produced domestically. This increase in availability enhances consumer welfare as individuals can select from a range of products that suit their preferences and needs.
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More Competitive Prices: Exposure to international markets encourages competition. Irish consumers benefit from lower prices as local firms strive to remain competitive against foreign imports. This competition stimulates innovation and efficiency, leading to better products at reduced prices in the domestic market.
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Innovation: Interaction with global markets drives Irish companies to innovate in product development and service delivery. Access to advanced technologies and ideas from abroad enables local firms to enhance the quality of their offerings, which ultimately benefits consumers through better, more efficient products.