Page 101 - Understanding Economics for Class 10

countries, Ford can (Comprise about 30%) of the world population) get huge sale
and hence profits.

5. In what ways will the production of cars by Ford Motors in India lead to interlinking of
Goyal Brothers Prakashan
production?
Ans. The company has set up his manufacturing unit near Chennai in collaboration with
Mahindra and Mahindra, an Indian Company. It gets other components from various
suppliers operating in India. Thus, India is providing a perfect production base for all
the operations related to the production of cars.

6. In what ways is a MNC different from other companies?
Ans. MNC is different from other companies in following ways:
(i) A MNC owns or rules the production in more than one nation. It not only sells its
finished products globally but goods and services are also produced globally while
other countries limit their production to a single country that is their home country.
They do not invest in other countries.
(ii) MNC is able to reap the benefits of cheap labour and easier access to important
markets while other companies may not able to reap such benefits

7. Nearly all major multinationals are American, Japanese or European, such as Nike, Coca-
Cola, Pepsi, Honda, Nokia. Can you guess why?

Ans. These are all developed countries having immense wealth as well as they are equipped
with better and advanced technology that helps them to produce greater output with more
efficiency. They find cheap labour in other developing countries and hence are able to
reduce the cost of production. They sell their products in the other markets of the world.

ForeIGn trAde And InteGrAtIon oF MArKets

 In the past, extensive trade took place along the routes connecting India and South Asia
to markets both in the East and West. Also, India was an attractive destination for many
companies who have trading interest like East India Company.
 The basic function of foreign trade is to create an opportunity for the producers to reach
beyond the domestic markets, i.e., markets of their own countries.
 Producers gets the opportunity to sell their product not only in the domestic market but
to compete in markets located in other countries of the world.
 Similarly, consumers also get wide variety of choice because through import, goods of
other countries are also open for them. Now they have access to both the domestically
produced goods as well as the imported goods.

example – chinese toys in India

 Chinese manufacturers seize an opportunity to export plastic toys to India, where toys
are sold at high prices. With competitive pricing and new designs, Chinese toys gain
popularity in Indian markets.
 Within a year, a significant percentage of toy shops replace Indian toys with Chinese
ones, leading to lower toy prices in India.

Economics Class X E-87