International competitiveness Topic 9: aggregate demand and aggregate supply International competitiveness

4.1.9 International competitiveness Students should be able to: Define measures of international competitiveness (relative unit labour costs and relative export prices) Analyse factors influencing international competitiveness Evaluate the significance of international competitiveness (benefits of being internationally competitive and problems of being internationally uncompetitive)

Microeconomics Topic 1: The Economic Problem Definitions Microeconomics Topic 1: The Economic Problem Competitiveness refers to:____________________ _________________________________________ and it changes over time. Competitiveness is usually determined by the _____ and/or ________ of the good or service. Measures of international competitiveness include relative unit labour costs and relative export prices Productivity is a measure of ____________ in an economy. Commonly, it is measured in terms of output per worker or output per hour worked and so can be linked to unit labour costs.

Microeconomics Topic 1: The Economic Problem Relative labour costs Microeconomics Topic 1: The Economic Problem If a firm employs 100 workers at £1000 each, what is its total wage bill? If these workers produced 50,000 units of output, what are unit labour costs? Unit labour costs for an economy are measured in index numbers with one year as the base year (100). What are UK relative unit labour costs?

Changes in relative labour costs Microeconomics Topic 1: The Economic Problem If the UK has a rise in relative unit labour costs, what does this mean?

Microeconomics Topic 1: The Economic Problem Index of hours worked in different countries: France, Germany, Italy, UK and USA Year 2000 100 121 120 117 110 2007 119 99 2010 129 123 103 2012 124 The table should be read horizontally. It shows the relatively _____ GDP per person employed, or per hour worked in the UK compared to other countries.

Relative export prices Microeconomics Topic 1: The Economic Problem What are relative export prices? What does a rise in relative export prices mean? Who are the UK’s main trading partners?

Microeconomics Topic 1: The Economic Problem UK’s trade June 2016 Microeconomics Topic 1: The Economic Problem The value of ________ (EU and Non-EU) increased to £24.9bn, and _______ increased to £40.2bn, compared with last month. Consequently the UK is a net importer this month, with imports exceeding exports by £_____

Export prices versus import prices Microeconomics Topic 1: The Economic Problem What does it signify if UK export prices are rising faster than import prices? The UK is _______ competitive What is the impact if oil prices fall? What is the impact if the value of the pound falls? EITHER OR

Factors influencing competitiveness Microeconomics Topic 1: The Economic Problem Factors influencing competitiveness

Microeconomics Topic 1: The Economic Problem China Microeconomics Topic 1: The Economic Problem China has had export-led growth, what are the benefits and costs of this?

Microeconomics Topic 1: The Economic Problem China today

Benefits of improved productivity on the UK economy Microeconomics Topic 1: The Economic Problem Benefits of improved productivity on the UK economy

Benefits of being internationally competitive Microeconomics Topic 1: The Economic Problem Benefits of being internationally competitive

Problems of sustaining competitiveness Microeconomics Topic 1: The Economic Problem BUT Germany and Singapore have remained competitive for a long time

Problems of being internationally uncompetitive Microeconomics Topic 1: The Economic Problem Problems of being internationally uncompetitive

Improving competitiveness by government policies Microeconomics Topic 1: The Economic Problem Supply-side policies: Exchange rate policies: Monetary policy Stable macro economy