INDIVIDUAL ASSIGNMENT 3 – RESEARCH REPORT Finally, Thailand is the chosen country to analyze income disparity through Gini coefficient

Finally, Thailand is the chosen country to analyze income disparity through Gini coefficient... In 2020, the export products such as footwear, clothing, accessories and the import produc

INDIVIDUAL ASSIGNMENT 3 – RESEARCH

REPORT

Table of Contents

Question 1: 2

A 2

B 3

C 4

D 4

Question 2: 5

A 5

B 7

C 7

D 8

Question 3: 8

References: 9

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The report will show the price, quantity, profit, consumer surplus and welfare loss that are results of companies A, B and J in various cases Furthermore, collect data and analyze it in the pre-Covid and post-Covid period Finally, Thailand is the chosen country to analyze income disparity through Gini coefficient

Question 1:

A.

 Both companies Astra-PC and Be-U manufacture and sell laptops in Vietnam market

 Q = Qa + Qb Have: Q = 20.000.000 – 5000P P =  20.000 0005000 −Q =

20.000 000−Qa Qb−

5000

Next: TR A = P*Qa= 20.000 000−Qa Qb−

5000 Qa

TR B = P*Qb= 20.000 000−Qa Qb−

5000 Qb

And: MC a = MC b = MR = Change TR∈

Change Q∈ = 2500  TR a = 2500Qa

TR b = 2500Qb

 The total profit of company A and B:

TPr a = 20.000 000−Qa Qb−

5000 Qa – 2500Qa 20.000 000−2Qa Qb−

5000 - 2500 = 0 20.000.000 – 2Qa – Qb = 12.500.000 (1)

TPr b = 20.000 000−Qa Qb−

5000 Qb – 2500Qb 20.000 000−Qa−2Qb

5000 - 2500 = 0 20.000.000 – Qa – 2Qb = 12.500.000 (2)

From (1) & (2) Qa = Qb = 2.500.000 units

P = 3000

 The profit of company A and B:

Pr a = Pr b = 20.000 000−Qa Qb−

5000 Qa – 2500Qa =

20.000 000−2.500.000−2.500 000

5000 2.500.000 – 2500*2.500.000 = 1.250.000.000

 When Q = 0  P = 4000

Consumer surplus = 12 (2.500.000*2)(4000 – 3000) = 2.500.000.000

 In case of perfect competition: P = MC = 2500

 Q = 20.000.000 – (5000*2500) = 7.500.000 units

 Welfare loss (compared to a free market) = 1

2 (7.500.000 – 2.500.000*2) (3000-2500) = 625.000.000

B.

 The total cost of J-Laps: TC = [1900 + (0.158*1900)]Q = 2200Q

 Astra-PC, Be-U and J-Laps sell laptops in Vietnam

 Q = Qa + Qb + Qj

 The total profit of company A, B and J:

TPr a = 20.000 000−Qa Qb Qj− −

5000 Qa – 2500Qa 20.000 000−2Qa Qb Qj− −

5000 - 2500 = 0 20.000.000 – 2Qa – Qb - Qj = 12.500.000 (1)

TPr b = 20.000 000−Qa Qb Qj− −

5000 Qb – 2500Qb 20.000 000−Qa−2Qb Qj−

5000 - 2500 = 0 20.000.000 – Qa – 2Qb – Qj = 12.500.000 (2)

TPr j = 20.000 000−Qa Qb Qj− −

5000 Qj – 2200Qj 20.000 000−Qa Qb− −2 Qj

5000 - 2200 = 0 20.000.000 – Qa – Qb – 2Qj = 11.001.000 (3)

From (1), (2) & (3) Qa = Qb = 1.500.250 units, Qj = 2.999.250 units

P = 20.000 000−( ∗2 1.500.250)−2.999 250

5000 = 2.800,05

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 The profit of company A, B and J:

Pr a = Pr b = 20.000 000−( ∗2 1.500.250)−2.999 250

5000 1.500.250 – 2500*1.500.250 = 450.150.120

Pr j = 20.000 000−( ∗2 1.500.250)−2.999 250

5000 2.999.250 – 2200*2.999.250 = 1.799.699.962,5

 Consumer surplus = 12 (1.500.250*2 + 2.999.250)(4000 – 2800) = 3.599.850.000

C.

In the case of the open market, the change in price swings downward from 3000 to 2800, the number of products on the market is likewise on the increase to 2.999.250 units from 2.500.000 units and raise the consumer surplus from 2.500.000.000 to 3.599.850.000 Thus, the opening up to trade will benefit consumers when they buy the goods at a lower cost as well as a rise in the standard of living (OECD 1998)

D.

 If Vietnam has not the tariff, the total cost of J-Laps: TC = 1900Q

 The total profit of the company A, B and J:

TPr a = 20.000 000−Qa Qb Qj− −

5000 Qa – 2500Qa 20.00 0.000−2 Qa Qb Qj− −

5000 - 2500 = 0 20.000.000 – 2Qa – Qb - Qj = 12.500.000 (1)

TPr b = 20.000 000−Qa Qb Qj− −

5000 Qb – 2500Qb 20.000 000−Qa−2Qb Qj−

5000 - 2500 = 0 20.000.000 – Qa – 2Qb – Qj = 12.500.000 (2)

TPr c = 20.000 000−Qa Qb Qj− −

5000 Qj – 1900Qj 20.000 000−Qa Qb− −2 Qj

5000 - 1900 = 0 20.000.000 – Qa – Qb – 2Qj = 9.500.000 (3)

¿ (1), (2) & (3) Qa = Qb = 1.125.000 units, Qj = 4.125.000 units

P = 20.000 000−( ∗2 1.125.000)−4.125 000

5000 = 2725

 The profit of the company A, B and J:

Pr a = Pr b = 1.125.000*2725 – 1.125.000 – 2500 = 253.125.000

Pr j = (4.125.000*2725) – (1900*4.125.000) = 3.403.125.000

 Consumer surplus = 12 (1.125.000*2 + 4.125.000)(4000 – 2725) = 4.064.062.500

 When Vietnamese customs remove the tariff, the price and profit of company A and B

in the market will be decreased However, the quantity and consumer surplus will increase Thus, J-Laps is the greatest winner compared to Astra-PC and Be-U that are losers because the profit of Japanese company is higher than the profit of Vietnamese companies in Vietnam market

Question 2:

A.

 The year previous to the Covid-19 pandemic: 2019

 The year during the Covid-19 pandemic: 2020

Units: Billion USD 2019 2020

Clothing, accessories (not knit or crochet) 16.1 13.3

Table 1: The main 5 export products

5

Units: Billion USD 2019 2020

Table 2: The main 5 import products

Table 3: Export value of the main 5 export partners

Table 4: Import value of the main 5 import partners

19.96 19.34

Table 5: Vietnamese overall trade balance

Table 6: Real effective exchange rate for Vietnam

Units: Billion USD 2019 2020

Units: Billion USD 2019 2020

2019 2020

Table 7: Income distribution and data on poverty for Vietnam

B.

In 2020, the export products such as footwear, clothing, accessories and the import products such as machinery, fuels, iron and steel are reducted compared to the previous Covid-19 Otherwise, the export volume in the electrical machinery, equipment and appliances raises in the post pandemic Besides, the import volume of plastics, electrical machinery and equipment also increases in this period For US and China markets, which are the high export volume from 2019 to 2020 while the export value of Japan, South Korea and Germany is declined There is the developing of the import value to Japan and Taiwan markets but the import value decreases to the markets of China, South Korea and Thailand in the post

Covid-19 pandemic On the other hand, the trade balance and exchange rate of Vietnam tend to reduce slightly after being hit by the Covid-19 pandemic Meanwhile, the unemployment rate rise sharply in the country due to the mass closure of businesses Vietnam’s trade pattern is affected strongly due to the difficulty in circulation of goods leading to an unprecedented decrease in output that occurred in 2020 and the increase of taxes among huge enterprises that causing product prices to fluctuate (OECD 2020)

C.

The Heckscher-Ohlin model is used to describe the trade movement of Vietnam market in the Covid-19 pandemic In the Heckscher-Ohlin model, countries export what they can most efficiently and abundantly produce This is perhaps the simplest model for predicting labor-market issues (McLaren 2012) According to the model, countries can also export things with which it is well-endowed and import goods which it is poorly endowed (Baskaran, Blochl, Bruck & Thesis 2011) When the covid epidemic broke out, businesses closed one after another, leading to a high unemployment rate and localities having to social distance, reducing productivity and supply in the market The reason why some items have a decrease

in export volume, for example, footwear, clothes and accessories (Table 1) Because these are

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non-essential products during the epidemic period and cause a decrease in export production

in Vietnam However, the import volume of some products tends to increase because of the high demand for essential products such as electrical machinery and equipment (Table 2) The demand for electrical devices used to support households with electricity in many different functions and especially to meet the conditions for students to study at home during the lockdown city (OECD 2021) Therefore, the quantity of exports will decrease due to a decrease in output, the quantity of imports will increase due to increased demand Therefore, the quantity of exports will decrease due to a decrease in output, the quantity of imports will increase due to increased demand

D.

The essential industries that are considered very important during the outbreak of the Covid pandemic are electrical machinery, equipment and food According to Tables 1 and 2, electrical machinery and equipment are at the top of both exports and imports in Vietnam This shows the high demand of users in Vietnam and around the world The reason why electrical machinery and equipment has become an essential industry during the pandemic is because all offline activities such as exchanges, meetings or large gatherings are limited to the maximum, so all activities will switch to online and remote management to avoid contact Therefore, if the epidemic is still not under control, the demand for electrical equipment will continue to increase in the near future (PwC n.d) However, industries that are considered non-essential such as footwear, clothing and accessories have been significantly reduced in Vietnam during the Covid-19 epidemic The reason is that they are non-essential items during the pandemic compared to the electrical, food and medicine items that are must-haves to take care of yourself and the family at home Footwear, clothing and accessories industry will develop as a new normal operating state is established in Vietnam and the world (ILO 2020)

Question 3:

One ASEAN country is chosen which is Thailand Income disparity is the uneven distribution

of income across a population As the income distribution becomes more unequal, so does the income disparity With a measure like the Gini coefficient, can be used to measure a population's level of income disparity (Cowell 2011) During the past 20 years, Thailand has experienced a huge change in income disparity (WorldBank n.d) Specifically, in the year

2000 the Gini coefficient reached a very high level of 42.8 indicating a deep strain of inequality between rich and poor In contrast, after nearly 2 decades, the Gini coefficient has dropped sharply to 36.4 in 2018 However, Thailand is still in the top 4 with income disparity

in ASEAN after the Philippines, Malaysia and Indonesia but Thailand's wealth disparity has narrowed over time, with the GINI index falling to 36.4 in 2018 from 39.4 in 2010 (Anuk & Manop 2020) Besides international trade, growing openness in developing countries increases income inequality through altering asset, spatial, and gender inequalities Additionally, he points out that most time-series analyses have found that increasing openness has raised the demand for labors (Anderson 2005) For Thailand, the country has a competitive advantage of having an abundant and low-cost unskilled labor force that can be hired by businesses or shop owners with low fees This has created many job opportunities for the poor, young, old or those without qualifications to help them earn money to escape poverty and develop their lives (ILO 2013) It also helps to close the gap between rich and poor and income disparity in Thailand Thailand has achieved significant progress in economic and social growth during the previous four decades, rising from a low-income to a middle-income country in under a generation As a result of its continuous high development and remarkable poverty reduction, Thailand has become a commonly referenced development success story Thailand's economy increased at an average rate each year This expansion resulted in the creation of millions of employment, which assisted in the emancipation of millions of people from poverty (WorldBank 2021) The country also has some of the top exports in the world, such as rice As output increases, productivity increases, so does the labor force, incomes increase, and poverty rates decrease Hence, this short article shows that international trade can reduce trade disparities in Thailand

References:

Anderson, E 2005, ‘Openness and inequality in developing countries: A review of theory and

recent evidence’, World Development, vol 33, no 7, pp 1045-1063, viewed 5 September

2021, Elsevier SD Freedom Collection database

Anuk, S & Manop, U 2020, Thailand Economic Focus: Building a more equal and

sustainable Thailand after COVID-19: A UN perspective, United Nations Thailand, viewed 7

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September 2021, < https://thailand.un.org/en/90303-thailand-economic-focus-building-more-equal-and-sustainable-thailand-after-covid-19-un>

Baskaran, T, Blochl, F, Bruck, T & Thesis, F-J 2011, ‘The Heckscher-Ohlin model and the

network structure of international trade’, International Review of Economics & Finance, vol.

20, no 2, pp.135-145, viewed 4 September 2021, Elsevier SD Freedom Collection database

Cowell, D-F 2011, Measuring Inequality, Oxford, ProQuess Ebook Central database.

EOC n.d, ‘Vietnam’, EOC, viewed 4 September 2021,

<https://oec.world/en/profile/country/vnm?depthSelector1=HS2Depth >

ILO 2013, Thailand: A labour market profile, International Labour Organization,

Switzerland

ILO 2020, What next for Asian garment production after COVID-19?, International Labour

Organization, Switzerland

McLaren, J 2012, International Trade, 1st Edition, Wiley, ProQuest Ebook Central database.

OEC n.d, Vietnam, OEC, viewed 1 September 2021,

<https://oec.world/en/profile/country/vnm>

OECD 1998, Open Markets Matter: The Benefits of Trade and Investment Liberalisation,

OECDiLibrary , viewed 2 September 2021, < https://www.oecd-ilibrary.org/trade/open-

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September 2021, < https://www.oecd.org/coronavirus/policy-responses/covid-19-and-international-trade-issues-and-actions-494da2fa/>

OECD 2021, International Trade in 2020: a look back and a look ahead, OECD, Paris.

PwC n.d, Analysis of the Potential Impacts of COVID-19 on Vietnamese Economy, company

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and Value Growth, YoY (%)/ 2009 - 2020’, Trend Economy, 9 August, viewed 3 September

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September 2021, <https://data.worldbank.org/indicator/SI.POV.GINI? end=2019&locations=TH&start=2000>

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<https://www.worldbank.org/en/country/thailand/overview>

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