Ekman
Well-Known Member
- Joined
- Oct 23, 2014
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- HSC
- 2015
Re: 2015 HSC Economics Marathon
That doesn't make sense. How will import competing firms benefit when their employees are asking for higher wages (causing increased costs), and their lack of international competitiveness due to their goods being priced higher than imports. If anything, it will be worse for import competing industries in comparison to export competing industries, as import competing industries have less total market share, when compared to export competing industries, and increasing prices further will cause their market share to decrease further.Export competing firms will not benefits from domestic inflation as the prices of their goods and services will increase, leading to a reduction in international competitiveness and thus reducing X levels and X revenue overall. Import competing firms will benefit from inflation to some extent. This may be because due to inflation, individuals will demand for higher wages (wage spiral index) and thus the higher wages will allow individuals to purchase cheaper imports rather then spending on higher priced domestic goods due to domestic inflation.