Q

Apply the gravity model to the UK in the year 2021

Home, - Define the gravity model

Question - a. Define the gravity model. Specify the variables utilised.

Answer -

The gravity model states that the the trade flows between two countries depend on the size of economy as well as the distance between two such economy. The variables utilised in the said model is gross domestic production of economy and geographical distance between such economy.

b. Apply the gravity model to India and China. Why has it taken so long for India and China to become serious trading partners? Think of 18th century trade patterns, importation of raw materials back to the UK from their colonies.

Answer -

It took a long time for India to become a serious trading partner with China due to differences in cultutal and political reasons. India has never been in good political terms with China due to some political reasons like China always supported Pakistan which is India's biggest enemy in the World. Due to such political factors, the government of India never take an initiative to enlarge trade pattern with China, one of its closest economy.

c. Apply the gravity model to the UK in the year 2021. What countries are most important to the UK's trade relationships?

Answer -

The gravity model applies to UK in the year 2021 in the sense that it has huge trade flow with France and Germany but comparatively lower trade flow with Japan. Countries like France, Germany and Japan have similar economy size (i.e., gross domestic production) but geographical distance differs significantly. The distance between UK and Japan is 8 times of the distance between UK and France/ Germany.

The gravity model states that the the trade flows between two countries depend on the size of economy as well as the distance between two such economy.

Since the economy size is similar but the geographical distance differs significantly, therefore the trade flow of UK with France/ Germany and Japan differs dramatically.


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