Question

What are the pros and cons of slashing product prices in China?

Answer 1

Pros :

1. It will create more demand for the products in the home country and thereby increases sales revenue.

2. Will result in more production and in turn aid in economical progress of the economy.

3. It will make the firms more competitive and also invite new firms to enter the market to cater to the demand.

Cons:

1. By catering to home demand, it will result in lesser exports thereby earning lesser foreign exchange for the country since China exports most of its production.

2. The country may loose out on its trading partners due to increased demand.