Page 102 - Understanding Economics for Class 10

 This example illustrates the impact of foreign trade on the Indian toy market, where Chinese
toys outperform their Indian counterparts, providing expanded business opportunities for
Chinese manufacturers but causing losses for Indian toy makers.

Goyal Brothers Prakashan
LET’S WORK THESE OUT (Page No. 61)

1. What was the main channel connecting countries in the past? How is it different now?
Ans. The main channel connecting countries was foreign trade in the past. In the past, extensive
trade took place along the routes connecting India and South Asia to markets both in the
East and West. Trade is still the main channel connecting countries. However, besides
trade, technology, capital, tourism is also playing major role in connecting countries now.

2. Distinguish between foreign trade and foreign investment.
Ans. Trade with other countries is called as foreign trade. It involves movement (import and
export) of goods and services whereas Foreign investment means movement of capital
from one country to another.
The objective of the foreign trade is to earn profit and excel global market whereas the
objective of foreign investment is to generate returns in long term.

3. In recent years China has been importing steel from India. Explain how the import of
steel by China will affect.
(i) steel companies in China. (ii) steel companies in India.
(iii) industries buying steel for production of other industrial goods in China.
Ans. (i) Supply of steel in China will improve but Chinese steel market will face stiff
competition from Indian steel market.
(ii) Steel Companies will be benefited as demand for Indian steel has increased. Indian
steel market will expand.
(iii) Other industrial goods producing companies will get more choices. They will avail
better option.

4. How will the import of steel from India into the Chinese markets lead to integration of
markets for steel in the two countries? Explain
Ans. Integration of markets for steel in the two countries will take place in following ways:
(i) Due to imports from India Chinese market will get more choice.
(ii) Chinese will make goods with the help of the steel imported from India and export
it to the other countries. These goods can be imported by India as well, in that case
India will become the exporter of the raw material (steel) and the importer of the
finished good.
(iii) Producers of steel in both the countries will compete with each other to capture the
maximum share in the market. As a result, prices of steel in both the countries tend
to be equal in the long run.

WHAt Is GLoBALIsAtIon?
 MNC’s are looking for the locations that are cheap for the production around the world
from the last two three decades.

E-88 Economics Class X