Question

Specialization is when a nation or individual concentrates its productive efforts on producing a limited variety of goods. It oftentimes has to forgo producing other goods and relies on obtaining those other goods through trade.

What is it that the US specializes in, that allow us to forgo the production of many other goods obtained through trade?

Answer 1

Specialization is the production process of specific products by a country. It is aimed at reduction of fiscal deficit, cost of production and raising consumer demand in a country. US is among the largest manufacturers of capital goods such as commercial planes, industrial equipment, telecommunication devices and electrical appliances. Majority of US exports constitute capital goods. US also specializes in production of plastic, chemicals and pharmaceutical products. This is due to the fact that cost of production of automobiles, plastics and heavy engineering products in US is comparatively lower than cost of production in other countries. However, US carefully produce services and prefer foreign services due to high costs of domestic services. US also rely more on local people for production of certain products such as cars, wines, processed food and others because local people prefer to purchase cheap and diversified products imported from foreign countries such as China, South korea, Japan and India. Cost of production of automobiles and consumer durable goods is low in these countries due to availability of cheap labor, electricity, land and other inputs. Again US does not fulfill demand of petroleum products by the domestic production. This is due to varying demand of different petroleum products among US people. Therefore, US shifts its production only on specialized petroleum products that has heavy demand in the US economy and imports certain petroleum products from foreign countries such as Nigeria, Mexico, Turkey and others.