1. International competitiveness
Topic 9: aggregate demand and aggregate supply
International competitiveness

2. 4.1.9 International competitiveness
Students should be able to:
Define measures of international competitiveness (relative unit labour costs and relative export prices)
Analyse factors influencing international competitiveness
Evaluate the significance of international competitiveness (benefits of being internationally competitive and problems of being internationally uncompetitive)

3. Microeconomics Topic 1: The Economic Problem
Definitions
Microeconomics Topic 1: The Economic Problem
Competitiveness refers to:____________________
_________________________________________ and it changes over time.
Competitiveness is usually determined by the _____ and/or ________ of the good or service.
Measures of international competitiveness include relative unit labour costs and relative export prices
Productivity is a measure of ____________ in an economy.
Commonly, it is measured in terms of output per worker or output per hour worked and so can be linked to unit labour costs.

4. Microeconomics Topic 1: The Economic Problem
Relative labour costs
Microeconomics Topic 1: The Economic Problem
If a firm employs 100 workers at £1000 each, what is its total wage bill?
If these workers produced 50,000 units of output, what are unit labour costs?
Unit labour costs for an economy are measured in index numbers with one year as the base year (100).
What are UK relative unit labour costs?

5. Changes in relative labour costs
Microeconomics Topic 1: The Economic Problem
If the UK has a rise in relative unit labour costs, what does this mean?

6. Microeconomics Topic 1: The Economic Problem
Index of hours worked in different countries: France, Germany, Italy, UK and USA
Year
2000
100
121
120
117
110
2007
119 99
2010
129
123
103
2012
124
The table should be read horizontally.
It shows the relatively _____ GDP per person employed, or per hour worked in the UK compared to other countries.

7. Relative export prices
Microeconomics Topic 1: The Economic Problem
What are relative export prices?
What does a rise in relative export prices mean?
Who are the UK’s main trading partners?

8. Microeconomics Topic 1: The Economic Problem
UK’s trade June 2016
Microeconomics Topic 1: The Economic Problem
The value of ________ (EU and Non-EU) increased to £24.9bn, and _______ increased to £40.2bn, compared with last month. Consequently the UK is a net importer this month, with imports exceeding exports by £_____

9. Export prices versus import prices
Microeconomics Topic 1: The Economic Problem
What does it signify if UK export prices are rising faster than import prices?
The UK is _______ competitive
What is the impact if oil prices fall?
What is the impact if the value of the pound falls?
EITHER OR

10. Factors influencing competitiveness
Microeconomics Topic 1: The Economic Problem
Factors influencing competitiveness

11. Microeconomics Topic 1: The Economic Problem
China
Microeconomics Topic 1: The Economic Problem
China has had export-led growth, what are the benefits and costs of this?

12. Microeconomics Topic 1: The Economic Problem
China today

13. Benefits of improved productivity on the UK economy
Microeconomics Topic 1: The Economic Problem
Benefits of improved productivity on the UK economy

14. Benefits of being internationally competitive
Microeconomics Topic 1: The Economic Problem
Benefits of being internationally competitive

15. Problems of sustaining competitiveness
Microeconomics Topic 1: The Economic Problem
BUT Germany and Singapore have remained competitive for a long time

16. Problems of being internationally uncompetitive
Microeconomics Topic 1: The Economic Problem
Problems of being internationally uncompetitive

17. Improving competitiveness by government policies
Microeconomics Topic 1: The Economic Problem
Supply-side policies:
Exchange rate policies:
Monetary policy
Stable macro economy