Question

A. When it comes to globalization, what exactly is outsourcing, what are the pros and cons.

B.should firms be prevented from outsourcing.

C. How does outsourcing raise Americans citizens standard of living.

Answer 1

Outsourcing means transferring some of the functions or department of the organization to an offshore country. For example, US banks shift their customer service to India. It is mainly done to cut the cost of non-critical functions of the company and make things cheaper for the consumer.

Another example of outsourcing is Apple shifting its manufacturing to China. In China, the same Apple iPhone get manufactured at a very cheap price. Which helps the company to sell more products at a cheaper cost.

PROS

Cheaper services and products.

The benefit of comparative advantage of different nations.

More profit for the company.

CONS

Fewer jobs in the country sending jobs outside.

Problems related to quality and turn around time in manufacturing.

b) No, firms should not be prevented from outsourcing. It allows the firm to cut unnecessary cost from their manufacturing or services and the benefit is transferred to the public in form of cheaper products and services. They can consume more and get more consumer surplus.

c) Outsourcing means goods and services are sold at a much lower cost. If the same Apple iPhone is manufactured in the US its cost will be very high because the wages in the US are much higher when compared to China. In that case, many people with low income will not be able to afford an iPhone. The same thing will be there for other products and services. People will consume less and their standard of living will fall. The cheaper the product, the more they consume, the higher the standard of living.