Answer to Question #115337 in Microeconomics for Saad

Question

Q 3. (5-marks) The textile industry is backbone industry for Pakistan. Textile lobbyists advocates a ban on the export of raw cotton (a major input for textile industry). Describe various arguments its lobbyists might make. Give a response as an economist to each of these arguments.

Answer 1

One of the arguments can be given is protection of the local infant industries. When the raw material is not exported, more industries will be set up in the country leading to industrialization in the country.

Another argument is that the through industrialization there will be creation of employment and the number of unemployed individuals will decrease. This a logical argument since the unemplyment rate will decrease and possible anti-social activities such as theft will reduce.

Thirdly, lobbyist can argue that with increase in the employment rate, the social welfare will be improved since individuals will be able to afford cost of living and afford the basic human wants.

Fourthly, there will be an improvement in the balance of payment. Export of raw materials is generates less revenue for the company while the export of the finished goods will generate more revenue for the country.

Last but not the least, is that the country will undergo growth and development. The growth of a country may be measured by the use of the GDP. Exprotation of finished product will increased the GDP which translates to growth of the country.