Question 1 - Given the total volume and importance of international trade and in

Question

Question 1 - Given the total volume and importance of international trade and international exchanges, describe the implications to someone's career in business, and to your education in particular.

Question 2 - Wal-Mart is famous for requesting ever lower price points from its suppliers: if a supplier offers a product for $45.00, Wal-Mart will ask the supplier to consider introducing a similar product for $39.00. According to the Heckscher-Ohlin Factor Theory, which consequences do such requests have?

Explanation / Answer

2)

Wall mart has the competitive advantage over its suppliers because it buys in bulk. The comparative advantage that Wall mart uses is the factor proportion theory. According to this in a free market economy where commodities are available in abundance, it is but natural that   buyers will seek out those suppliers who can afford to give them cheaply. This is possible due to the factor proportion advantages that suppliers have in getting their inputs cheaply. Hence wal am art puts in the Heckscher-Ohlin Factor Theory to understand that Wal mart will have a comparative advantage in those goods that suppliers intensively use its abundant factors. Such requests from Wal mart makes the suppliers feel that there is a possibility to reduce prices if factors of production are used intensively and hence strive to make their products comparatively cheap so that they can supply in bulk to Wal -Mart.

The factor proportion theory also states that factors can be used intensely and abundantly and also can be factored in a very judicious manner to bring in the greatest advantage to the supplier in terms of low prices. Among various other things that influence the decision to supply the prices of factors and their distinct advantages over other factors leads to the low price of supply over which Wal mart has a distinct advantage.

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