Understanding Economic Equilibrium

CHAPTER 19

As the World Turns

The United States makes up about 4 percent of the world’s consumers; the 19 states of the Euro area only slightly more. More than 80 percent of the world’s population lives in what economists classify as emerging economies. Of course, some emerging economies are more advanced than others. But outside of North America, Europe, Japan, and Australia, more or less everybody else is emerging—a very large pool of potential consumers whose income is growing.

Perhaps the most fundamental, and obvious, of all economic principles is that if you’re selling something, you’re better off if that thing is something people want to buy. It is relevant in a discussion of the character of trade with emerging economies because the incomes ...