Chile has a free-market oriented economic system whereas for prices for goods and services are fixed by the law of supply and demand and all are allowed to reach their equilibrium without intervention by the government or any other outside bodies. In a free market system a buyer and a seller transact freely only when they voluntarily agree on a price of a good or a service. This relationship of supply and demand affects the market and the price of a product.
The law of supply and demand states that when there is high demand for a good or service, the price of the good or service rises. If there is a large supply of a good or service but not enough demand for the good or service, the price falls. Each transaction involves a buyer and a seller. The seller places an offer for an item and the buyer may accept or reject the offer. When there is a high demand for certain good in a particular city or country and a lack of supply for a quality good, the prices tend to rise as well. Also, when there is no demand for a certain good due to a weak economy and an
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Chile has signed Free Trade Agreement (FTA) with a whole network of countries, including a Free Trade Agreement with the United States that was signed in 2003 and was only implemented in January 2004 (En.m.wikipedia.org, 2017).
As the world’s largest producer of copper, Chile has been hit hard by the dramatic slump in prices. It’s not just that Chile is a big player in the copper market; the copper industry is also a big player in the Chilean economy. As noted by Stratfor, “49% of the country’s exports are related to the copper industry, and mining activities account for about 14% of Chile’s gross domestic product.” But Chile has weathered the drop in copper prices — which have plunged by 35 percent since their peak in 2011 — thanks to government policies enacted in the recent past. This can be seen the picture
What is the Law of Supply and Demand? Explain how increases and decreases in supply and demand affect prices.
The government also advocated the development of domestic industry in order to protect Chile from future external economic shocks. Thus, Chile, like many other Latin American nations at the time, adopted a policy of import-substitution industrialization. Its aim was to “encourage the creation of homegrown industries to replace Latin American dependence on foreign manufactured goods” (Berliner) which was done in part by establishing quotas, licenses, and higher tariffs on imports and a strict exchange rate in Chile.
-The role and significance of prices in the market economy has to do with supply and demand. If there are the same amount of buyers as products, the price will settle. If there are more buyers than products, the price of the product will rise. And, if there are more products than buyers, the price of the product will decrease. This occurs until the supply of the product matches the demand of the product.
Chile has a competitive advantage in the forestry sector since pine grows exponentially faster in the southern forests of Chile than in New Zealand, Sweden, and Canada. While Chile has a competitive advantage in the forestry sector, it is not the leading export. Chile’s leading export is the mining sector which makes up 51 percent of the exports, and contributes more than eleven percent to Chile’s GDP. Not only is the forestry and mining sector important to Chile’s exports, but also the fishery sectors; Chile is one of world’s leading exporters of fish and fishmeal. While Chile is a large exporter and focuses on increasing exports, Chile also imports goods. Chile’s main imported good is manufactured goods, such as
This is a result from the economy being built upon neoliberalism ideology and a free market economy, while being infused with socialist and capitalist principles. Aspects of neoliberalism include a reliance on local and global free markets, with the state maintaining a minimal role of the political economy. In fact, based on the 2014 Index of Economic Freedom, Chile has the 7th freest market in the entire world, ranking ahead of even the United States. These aspects are evident in the Chilean government’s approach to the economy, as they favor foreign investment and international trade. One way in which the Chilean government has attempted to increase the amount of foreign investment is through their privatization of Chilean ports, waste-water treatment facilities and private investment in the construction and operation of domestic infrastructure. The Chilean government chooses to have a limited role in the regulation of the economy, with the only heavily regulated aspects consisting of utilities, the banking system, security markets and pension funds. These free market principles of Chile can be seen as very capitalistic, this is due to the fact that much of the economic suffering during Allende’s rule was because of his socialist policies. A large part of Chile’s economic success is a result of their willingness to participate in capitalistic means. They are a very favorable foreign investment, considering how supportive the government is of foreign investment, which happens to be the basis that the economy thrives on. Foreign countries feel confident in their investments in Chile due to the stability and the easy going nature of the government. Countries such as the United States, Canada, Mexico, along with the rest of South America, are some of the biggest exporters of Chilean
Chile stretches along 2,672 miles with an average width of 112 miles. More than one out of every three Chileans live in Santiago metropolitan region which is the capital of Chile. Two Chilean poets have won the Nobel Prize in literature. Chile’s population sits around 17,363,894 ranking Chile 63, they have a human development index of 41 of 187 countries. GDP per capita is $19,100 with an adult literacy at 99% for both males and females. The general attitudes are friendly and warm, but they might be shy and reserved when first meeting someone, they are also known for their sharp, witty and somewhat cynical sense of humor. Chileans are extremely patriotic and take pride in their nation’s cultural, educational, and economic achievements. Chile has a large middle class, and their educational system enables many poorer people to excel. When it comes to Chilean appearance they closely follow European styles, North American fashions are also popular especially among the youth. Greetings in Chile are important because they stress that one is welcome and recognized. The most common greeting among friends and relatives is the abrazo, consisting of a handshake and a hug. Chileans eat their main meal in the middle of the day and a lighter meal between 8 and 10pm, they typically have a tea time around 5 or 6pm where beverages, small sandwiches, and cookies or cake are served. In restaurants a server can be summoned with a raised finger; meal checks are not brought to the table until
Chile has a lot of iron, coal, iron ore, gold, silver, manganese, sulfur, petroleum, nitrates, and
The discovery of these metals progressed the growth of Chile’s international business. Copper soon became the most important export of Chile, and still is. 52% percent of Chile’s present day GDP is composed of copper (Chile). In 1811, Chile started practicing free trade around the world. Limited to no and tariffs were imposed on Chile’s clientele. This was beneficial to both parties because no tariffs meant that other countries would keep on buying from Chile because they didn’t have to pay for trade. In Chile, free trade was important then, and still is now. Free trade is an important reason that the Chilean economy is so strong. Chilean’s free trade allows its partners like China, the United States, and Japan buy more without paying for
Chile also used its variety of climates, natural resources, and vegetation to its advantage. Simon Collier states that “From the viewpoint of foreign trade, the goose that laid most of the golden eggs was mining” (76). Sure enough mining was a vital component for Chile’s development. For example, the deserts of Chile contain one of Chile’s most profitable natural
The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the
there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.
Understanding the fundamental concepts of economics allows us to analyze laws that have a direct bearing on the economy. These laws and theories are essentially the backbone of how economics is used and studied. The law of demand can be expressed by stating that as long as all other factors remain constant, as prices rise, the quantity of demand for that product falls. Conversely, as the price falls, the quantity of demand for that product rises (Colander, 2006, p 91). Price is the tool used that controls how much consumers want based on how much they demand. At any given price a certain quantity of a product is demanded by consumers. As the price decreases, the quantity of the products demanded will increase. This indicates that more individuals demand the good or service as the price is lowered. This can be illustrated using the demand curve. The demand curve is a downward sloping line that illustrates the inversely related relationship of price and quantity demanded.
The consumers and producers behave differently. To explain their behavior better economists introduced the concepts of supply and demand. In short words, the law of demand states that with price increase quantity demanded of a good or services decreases, and the law of supply states that quantity of a good produced increase if the market price of that good increases. Of course, it is just general rule and does not explain all varieties of factors impacting the supply and
The most apparent benefit for nations that choose to enter into Free-trade Agreements with the United States is investment. For Latin American nations seeking to build wealth and inspire innovation, foreign investment can be a major game changer. Unsurprisingly, the United States exports and imports far more products from nations with free-trade agreements in place than from Non-FTA countries. Despite the recent downward trend in the value of U.S. currency, American investment continues to have dramatic effects on the growth of partner nations. For instance, in Chile their particular free-trade agreement is projected to increase economic growth by half a percentage point, a modest but meaningful impact. Not to mention the three months following the entry of the U.S.-Chile Free Trade Agreement, total U.S. exports to
Chile’s sustained growth over the past few decades has reduced poverty and substantially improved living conditions. The country stands out for having the highest Human Development Index in Latin America, as well as having made progress towards shrinking the income gap with OECD countries. This achievement is largely related to capital deepening as well as robust growth in labor force participation, while total factor productivity (TFP) growth has been meager, stalling after 2000 (OECD, 2017). In terms of labor productivity, Chile has only reached 40% of US levels, and 55% of OECD levels (McKinsey, 2015).