Econ Exam Question Answer

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1. When comparing the composition of world trade in the early 20th century to the early 21st century, we find major compositional changes. These include a relative decline in trade in agricultural and primary-products (including raw materials). How would you explain this in terms of broad historical developments during this period?

The typical composition of world production during this period experienced major changes. Focusing on today’s major industrial countries the industrial-employment composition was focused primarily on agriculture. Most value was in land. The predominant single consumption category was food. Since then, the economies shifted from agriculture to the manufacturing sectors. Income rose, and consumption shifted in favor of (increasingly affordable) manufacturing goods. Both income and price elasticities were in manufactures than in agricultural products. At the same time there was a steady tendency for synthetic (manufactured) inputs to replace agricultural based raw materials and industrial inputs. Hence international trade conformed to patterns of overall change in world consumption and production.

2. In the past-half century, the developing countries have experienced major compositional shifts from exports of primary products (including agricultural and raw materials) to exports of manufactures. How might you explain this in terms of broad historical developments during this period?

The compositional changes in world trade from the early 20th century to the early 21st century can be attributed to the changes in the composition of world production, brought about mainly due to technological progress. Focusing on today’s Industrialized Countries (primarily members of the OECD), the industrial-employment composition was focused primarily on agriculture. Most value was in land. The predominant single consumption category was food. Since then, technological progress in these economies shifted resources from the agricultural to the...
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