Question

How do larger markets, through trade, create incentives for companies to solve problems? Give an example of a problem which might be solved through larger markets.

Answer 1

Answer and Explanation:

Larger markets can impose sanctions and requirements that alleviate a problem that companies have caused. As the large markets are influential and promote a strong profit for companies, the loss of that market can be very harmful. For this reason, the impositions that these markets impose are often met, so that the commercial relationship is not undone. Therefore, these markets have the power to encourage some problems to be solved.

An example of this can be seen today, when the new president, Jonh Biden, using the US market, which is a large market, demands Brazilian companies to limit deforestation and environmental destruction so that their products continue to be purchased by US government.