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1. With practical examples, briefly explain the concept of market integration in market...

Question:

1. With practical examples, briefly explain the concept of market integration in market development.

2. Briefly discuss two reasons that explained the fall in output in Central and Eastern Europe after prices were liberalized in their markets.

Market Development:

In economic terms, it is defined as a growth strategy that develops and identifies new market segments for newly-produced goods. For example- we can take leading footwear firms including Adidas, Reebok, etc that have already entered international markets for market expansion.

Answer and Explanation:

1. Answer: The concept of market integration in market development:

Market integration is the result of an identical pattern of prices in different locations for related goods over a long time. It allows and enables economies to spread marketing messages across multiple channels.

Market integration can be of three types:

  • Horizontal integration.
  • Vertical integration.
  • Conglomeration.

Practical examples of market integration in market development:

Examples of companies using horizontal integration:

The acquiring company: Pepsico

Acquired company: Quaker Oats

Examples of companies using vertical integration followed by the forward integration and the backward integration:

Wholesaler, the meat industry, etc.

2. Answer: Reasons behind fall in output in central and eastern Europe after the price liberalization:

During the transition phase, the impact of liberalization on the behavior of output to market consists of the process of restructuring capital stock inherited from the traditional system. Imposing liberalization during the transition from planned to a market economy must not be a good idea as it initially created transitional unemployment capital and contraction of the old enterprise sector. During the transition phase, most of the countries of Eastern Europe suffer from chronic excess demand that further led to shortages of basic consumer goods.

Based on the above explanation, we can easily find out the two major reasons behind the declined output. They must include reasons like:

i. Unemployment Creation.

ii. The obsessive growth orientation and declined real wages.


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