Question

a) What is globalisation and explain the beneficial effects on consumers, producers and government?

Answer 1

Globalization allows production of goods in various parts of the universe resulting in higher level of specialization. This leads to lower average costs and lower consumer prices. Domestic monopolies are characterized by lack of competition but with globalization, domestic organizations face higher level of competition from foreign companies resulting in higher level of efficiency. There are various benefits of globalization as enumerated below:

• It results in free trade which leads to various nations specializing in the production of those goods in which they have competitive edge as against other nations. This implies that goods could be produced at a lower opportunity cost. There are numerous benefits which result from free trade as nations specialize in the production of goods and services such as lower consumer prices, higher level of competition, economies of scale, greater variety of goods, and a bigger exports market for domestic producers.
• Increased migration of labour provides both workers and recipient nations with numerous benefits. There are increased opportunities to search for jobs elsewhere if a country experiences higher level of unemployment. This labour migration process leads to reduction of geographical inequality.
• Globalization results in higher level of specialization in the production of goods and services and enables production of goods in various parts of the universe. This results in lower average costs of goods and services and lower consumer prices.
• It encourages consumers and producers to take advantage of economies of scale and high division of labour.
• The competitive pressures resulting from globalization might lead to better protection of labour and improved governance.