Question

1) What is "Globalization of markets" and "Globalization of production". How have these two concepts resulted in the acceleration of globalization?

2)Explain the Theory of Absolute Advantage and the Theory of Comparative Advantage by providing examples of two countries trading rice and cocoa.

Answer 1

1.

Globalization of markets, refers to the integration of markets present in different economies. Here, one firm can operate in different markets that become seamless to each other and firms also make practices that are standardized and internationally accepted. In contrast to it, globalization of production refers to the phenomenon where the firm has access to different factors of production from different parts of the world. Firm opts for the global sourcing and get resources at the best available cost and become competitive in the international market. These two concepts help making different markets to get connected with each other. It makes movement of workers, capital and technology to cross the borders as a part of the globalization of production as well as finished products and services to reach out to the different markets and serve customers. It facilitated the whole process of globalization.

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