Take Home Assignment

1. How does trade create wealth or make everyone better off?

In my opinion, trade make economy moving forward, and create wealth continuously, thus make
everyone in the world better off at maximum extent.

a. Conditions of production (tangible production factors such as labour, capital, land) differ
from producer to producer, country to country which is the driving force for trade. Because of
trade is able to bring the goods from high utility locations to low utility locations. Due to the
demand of products or goods from distant places locally people/company and country may
have earning or saving due to export of goods/ products or trade. If there is no trade we can’t
imagine what the world will become, from the history we may see more stable and increasing
trade driving the society / technology developing. Trade allows each country to specialise in
its most competitive products.
b. Because of opportunity cost, each country manufacture or produce own products and goods
by using rules of “comparative advantage “, thus let all countries and all peoples do their roles
In efficient and productive way, let everyone better off. For example one country or company
is good at produce certain products, but taking opportunity cost consideration it is better to
produce most productive and efficient products as per comparative advantage rules, and
other products let other country or company to produce, so both of country or company
could create wealth, and make everyone better off.
c. More wealth is created by trade because factors of production are used more efficiently, and
all participants are better off than they would be without trade.
d. Because of trade competition will increase gradually, and drive company. Country and people
to improve their knowledge, making good use of new technology, knowledge explosion, etc ,
Enable to create more wealth. It is another way to let everyone better off.

2. It is often said maritime transport is dependent on the levels of international trade.

However, maritime transport can also create or add to trade? Please comment on how this
can occur.
In my opinion maritime transport is able to create more trade, particularly international
trade, there are following points to support my opinion:
a. In old days because of maritime transport freight quite high comparatively due to economy
of scaling/ ship building technology/ fuel efficiency and so on, but nowadays time changing
and technology creation and implementation make cost for maritime transport become
more competitive comparing land transport and air transport.
b. While transport distance remains the same, transit time has been shortened due to
improved transport technology, such as speed increase, canal utilisation (Suez and Panama)
more frequent services & cargo handling at ports, handling time in ports because more
efficient and good port facility support transit time reducing all the way, it drive more goods
Would like to be carried by sea.
c. Reduced transport costs and improved port efficiency are among the factors which can
greatly enhance trade, mainly because of economy of scaling transport cost reduced a lot,
but other transportation means cost increasing, causing maritime transportation become
more competitive. Previously some goods with low price not traded but now becoming
possible. Transport cost per tonne-mile reduced substantially , which makes transport more
affordable.
d. Transport systems broaden access to new markets and factors of production thus promoting
the establishment of specialised marketplaces.
A finished product can be assembled in one place while its components can come from
around the world, for example iphone parts are made in some other country but assemble at
America, this is because of low cost of transportation.
Production is efficient as long as corresponding transport system is cost effective, fast,
reliable and efficient.
e. New maritime transport techniques and technologies enable commodities that were
previously not technically and economically viable for trade, for example because of reefer
ships or reefer container developing transport fresh fruits/ meats /fishes become possible
and reliable, and car carrier could carry cars manufactured from one country to export
oversea to other country across the ocean, in one word many specialised ships drive and
create trades as well. The concept of “seasonal vegetable” is fading fast thanks to transport.

Student name: Wang yongliang