Question

When china's clothing industry expands, the increase in world supply lowers the world price of clothing. consider the effects this has on both an importer and an exporter of clothing?

Answer 1

Answer: When the price of clothes in world supply falls due to an expansion in the Chinese clothing industry, the exportation profit on clothes will drop, because the supply is above demand, which will reduced the selling price. The reduction in selling price will be because of competition of customers between the exporters.

The importers will not be affect much, because their will only buy from a dealer who is ready to sale in relation to the decrease in consumer price. Therefore the importers are not in a disadvantage of this event, rather it will grow their profit, as the competition between the exporters increase.

The exporters in this context are those that produce the clothes for exportation. And the importers are those that buys the clothes and sale it in another country.

Answer 2

Answer:

The global reduction in the price of clothing because of China's clothing industry expansion poses both threats and opportunities to importers and exporters as explained below.

Explanation:

Increase in supply of a basic good like clothing will reduce profitability for both importers and exporters

Reduction in price as a result increase in global supply also indicates market saturation and unit elasticity of price.

Clothing is a basic need, people will always buy what to wear, reduced pricing will lower the costs of production and make clothing more affordable but it may make its importation and exportation activity less profitable.