1. Transportation of goods by sea is a derived demand. Justify using economic principles the drivers...

1. Transportation of goods by sea is a derived demand. Justify using economic principles the drivers of global sea trade. Also, ennunciate how the GDP of a country stand to affect it participation in trade and it's local shipping sector. What are four other factors affecting the demand of shipping services globally.

Expert Solution

1. Derived demand is a demand resulting from the demand for an intermediate or related good/service. If a country is a major importer or a exporter then sea transportation to and from this country would be demanded more and logistics and supply chain industry will be having good business.

drivers of global sea trade are: demand for shipping. supply ( shipping companies), complementary services like financial companies, Global production and consumption,

Hence it is clear that global production determines the source and global consumption determines the destination of any shipment. It also depends on low cost locations from where business for shipping originates. The supply of shipping companies determines the cost. cost also depends on fuel prices, port rents and other bureaucratic procedures.

GDP of a country stand to affect it participation in trade and it's local shipping sector:

China is world's largest exporter and hence highest maritime volume also comes from the same country. It is number two in GDP ranking after USA. India, USA are main maritime users as GDP values are large and have a very high scope for international trade. China and India population also contributes in this regard.

and factors affecting the demand of shipping services globally are world economy: A state of global economy whether it is having recessionary cycle or recovery cycle or a booming cycle. Post recession in 2008, demand for shipping services had gone down.

international maritime trade: Maritime transportation is cheapest for any transport internationally.

Average achieved profit: like any other business profit determines the number of firms operating in the business.

political events : Protectionism in the form of tariff, embargo reduces demand for trade. Eg. recent sanctions by US on China.

transport costs : Fuel prices are key drivers along with port fees.

Rahul Sunny answered 1 year ago

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